by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Keynesian Perspective of Aggregate Demand? The Keynesian perspective focuses on aggregate demand. The idea is simple: firms produce output only if they expect it to sell. Thus, while the availability of the factors of production determines a nation’s...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Recessionary and Inflationary Gap? Keynes argued that, for reasons we explain shortly, aggregate demand is not stable—that it can change unexpectedly. Suppose the economy starts where AD intersects SRAS at P0 and Yp. Because Yp is potential output, the...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Consumption Expenditure? Consumption expenditure is spending by households and individuals on durable goods, nondurable goods, and services. Durable goods are items that last and provide value over time, such as automobiles. Nondurable goods are things like...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Investment Expenditure? We call spending on new capital goods investment expenditure. Investment falls into four categories: producer’s durable equipment and software, nonresidential structures (such as factories, offices, and retail locations), changes in...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Government Spending as a Part of Aggregate Demand? The third component of aggregate demand is federal, state, and local government spending. Although we usually view the United States as a market economy, government still plays a significant role in the...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is a Healthy Climate for Economic Growth? While physical and human capital deepening and better technology are important, equally important to a nation’s well-being is the climate or system within which these inputs are cultivated. Both the type of market economy...
