Econ 103: Macroecon Lecture 4 - Consumption, Equilibrium Income, & Fiscal Policy, Study notes of Introduction to Macroeconomics

Download Econ 103: Macroecon Lecture 4 - Consumption, Equilibrium Income, & Fiscal Policy and more Study notes Introduction to Macroeconomics in PDF only on Docsity! Lecture 04 page 1/1 https://netfiles.uiuc.edu/camara/econ103/fall08/lecture04.pdf University of Illinois Sept/19/2008 Econ 103 – Macroeconomic Principles TA Odilon Camara Read Chapters 6, 7, 8 and 9 (Book) and Reading 3 (Internet) 1. Consumption and Investment (Chapter 6 and Reading 3) - Consumption Equation, Marginal Propensity to Consume and Autonomous Consumption - Average vs. Marginal Propensity to Consume (and Save) - Example: Consumption Function C = C0 + C1*Yd C0 = autonomous spending (the amount we would spend if our income was 0) C1 = Marginal Propensity to Consume (MPC) Yd = disposable income. 2. Equilibrium National Income (Chapters 7 and 8) Part I: Graphs - The equilibrium level of national income - Full Employment - Recessionary and Inflationary Gaps 3. Fiscal Policy (Chapters 8 and 9) – Definition: Government spending and taxation policy to achieve macroeconomic goals of full employment without inflation (pg. 198) – How to use Fiscal Policy in cases of Recessionary and Inflationary gaps? (counter-cyclical fiscal policies) - Regressive Taxes vs. Progressive Taxes