Principles of Macroeconomics / Unit 18 MAC 1710 short lesson, about 20 seconds
Model Three: The Expenditure Model
Captions available
The idea
Total planned spending against real GDP, with a forty-five degree line marking where the two are equal. Equilibrium is the crossing. The price level does not appear anywhere in it.
In practice
This is where the multiplier and both gaps are worked.
Where people slip
Omitting the price level is what makes its inflationary gap a measure of excess spending rather than a forecast of output.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Builds on
Unlocks
- Nothing yet depends on this.
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