Objectives of Chapter 3

Objectives of Chapter 3 The Simple Keynesian Theory of Income Determination

 To determine the roles of exogenous variables affecting desired spending that tend to drive cyclical changes in income and endogenous variables that are further affect desired spending.

 To understand the roles of consumption, savings, and autonomous forces affecting investment, government, and net exports on equilibrium income.

 To determine what happens to the economy when it is not in equilibrium.

 To understand the equilibrium condition when autonomous planned spending (injections) equal induced savings (leakages).

 To understand the role of the income multiplier and what determines its value.

 To analyze the impact of government spending and taxes (fiscal policy) on aggregate income.

 To generalize the equilibrium model to include income taxes and induced net exports.

 To be able to apply the Keynesian theory of income determination to current fiscal policy initiatives and other real world applications.