What is the concept of Expenditure Multiplier? Where does it start, and what is the end result (what factors would change in the process)?

Please insert a graph on your paper which shows how the multiplier actually works, and explain step by step of what is happening.

Please fully explain what happens to the multiplier when the aggregate demand is increased in Short Run; and explain what happens whens to the multiplier when the aggregate demand is increased in Long Run. Use the graphs available on your slides and explain step by step.

*(You can read: an increase in aggregate demand in the short run/an increase in aggregate demand in the long run in your economics book)

BLO Fixed Prices and Expenditure Plans Expenditure Plans The components of aggregate expenditure sum GOP TRA Y-C-V+G+X-M Two of the components of aggregate expenditure consumption and imports are neanced by GOP. So there is a two-way link between aggregate expenditure and GDP acer 0 0 S The Multiplier and the Price Level Deriving the Aggregate Demand Curve When the price level changes, a weatherfect and suutan effects change the - Aggregate expenditure . Quantity of real GDP demanded the next slide shows the effects of a change in the price level on the AE curve, ubrum expenditure and the quantity of real GDP demanded. acer The Multiplier and the Price Level Aggregate Expenditure and Aggregate Demand The aggregate expenditure curve is the relationship between aggregate planned expenditure and real GDP with all other infuences on aggregate planned expenditure remaining the me The aggregate demand curve is the relationship between the quantity of real GOP demanded and the price level with all the influences on agregate demand remaining the same . acer 1 Fixed Prices and Expenditure Plans Consumption and Saving Plans Consumption expenditure is inuenced by many factors but the most direct one is disposable income. Disposable income is aggregate income of real GOP, Y. minus net taxes, Cal disposable income YD The equation for disposable income is YD: Y- AN acer 0 0 LLO Fixed Prices and Expenditure Plans Consumption and Saving Plans Consumption expenditure is influenced by many factors but the most direct one is disposable income Disposable income is aggregate income or real GDP Y, minus net taxes. T Cal disposable income YD. The equation for disposable income is YD=YT AL36 Fixed Prices and Expenditure Plans Disposable income, Yo, is either spent on consumption goods and services, C, or saved. S. Thali, YD = CS The relationship between consumption expenditure and disposable income other things remaining the same, the consumption function The relationship between saving and disposable income, other things remaining the same, is the saving function Figure 28.1 illustrates the consumption function and the saving function acer www 1,038 Fixed Prices and Expenditure Plans Marginal Propensities to consume and Save The marginal propensity to consume (MPC) is the fraction of a change in disposable income that is consumed It is calculated as the change in consumption expenditure AC, divided by the change in disposable income, AYD. MPC = AC SYD T-N acer ? 1 0 P 7 Az Fixed Prices and Expenditure Plans The marginal propensity to save (MPS) is the traction of a change in disposable ncome that saved It is calculated as the change in saving, as, divided by the change in disposable income, LYD that brought it about That is MPS - ASSY . RE acer 9 2 P ALLA Fixed Prices and Expenditure Plans Consumption (C) as a Function of Real GOP Consumption expenditure changes when disposable income changes and disposable income changes when real GDP changes. So consumption expenditure depends not only on disposable income but also on real GDP We use this link between COP and consumption expenditure to determine equilibrium expenditure acer 0 7 0 HORI Fixed Prices and Expenditure Plans Import Function Import is another component of aggregate expenditure which is influenced by real GOP The relationship between imports and real GDP is delemined by the marginal propensity to import which is the traction of an increase in real GOP spent on imports It is calculated as the changes in imports divided by the change in real GDP. other things remaining the same If an increase in real GDP of $1 on increases imports by 50 25 Inition, the marginal propensity to mport 0 25 12. 0 BLO Fixed Prices and Expenditure Plans Expenditure Plans The components of aggregate expenditure sum GOP TRA Y-C-V+G+X-M Two of the components of aggregate expenditure consumption and imports are neanced by GOP. So there is a two-way link between aggregate expenditure and GDP acer 0 0 S The Multiplier and the Price Level Deriving the Aggregate Demand Curve When the price level changes, a weatherfect and suutan effects change the - Aggregate expenditure . Quantity of real GDP demanded the next slide shows the effects of a change in the price level on the AE curve, ubrum expenditure and the quantity of real GDP demanded. acer The Multiplier and the Price Level Aggregate Expenditure and Aggregate Demand The aggregate expenditure curve is the relationship between aggregate planned expenditure and real GDP with all other infuences on aggregate planned expenditure remaining the me The aggregate demand curve is the relationship between the quantity of real GOP demanded and the price level with all the influences on agregate demand remaining the same . acer 1 Fixed Prices and Expenditure Plans Consumption and Saving Plans Consumption expenditure is inuenced by many factors but the most direct one is disposable income. Disposable income is aggregate income of real GOP, Y. minus net taxes, Cal disposable income YD The equation for disposable income is YD: Y- AN acer 0 0 LLO Fixed Prices and Expenditure Plans Consumption and Saving Plans Consumption expenditure is influenced by many factors but the most direct one is disposable income Disposable income is aggregate income or real GDP Y, minus net taxes. T Cal disposable income YD. The equation for disposable income is YD=YT AL36 Fixed Prices and Expenditure Plans Disposable income, Yo, is either spent on consumption goods and services, C, or saved. S. Thali, YD = CS The relationship between consumption expenditure and disposable income other things remaining the same, the consumption function The relationship between saving and disposable income, other things remaining the same, is the saving function Figure 28.1 illustrates the consumption function and the saving function acer www 1,038 Fixed Prices and Expenditure Plans Marginal Propensities to consume and Save The marginal propensity to consume (MPC) is the fraction of a change in disposable income that is consumed It is calculated as the change in consumption expenditure AC, divided by the change in disposable income, AYD. MPC = AC SYD T-N acer ? 1 0 P 7 Az Fixed Prices and Expenditure Plans The marginal propensity to save (MPS) is the traction of a change in disposable ncome that saved It is calculated as the change in saving, as, divided by the change in disposable income, LYD that brought it about That is MPS - ASSY . RE acer 9 2 P ALLA Fixed Prices and Expenditure Plans Consumption (C) as a Function of Real GOP Consumption expenditure changes when disposable income changes and disposable income changes when real GDP changes. So consumption expenditure depends not only on disposable income but also on real GDP We use this link between COP and consumption expenditure to determine equilibrium expenditure acer 0 7 0 HORI Fixed Prices and Expenditure Plans Import Function Import is another component of aggregate expenditure which is influenced by real GOP The relationship between imports and real GDP is delemined by the marginal propensity to import which is the traction of an increase in real GOP spent on imports It is calculated as the changes in imports divided by the change in real GDP. other things remaining the same If an increase in real GDP of $1 on increases imports by 50 25 Inition, the marginal propensity to mport 0 25 12. 0