Summary: Bus 1002 Week 10

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Read the summary and the most important questions on BUS 1002 Week 10

  • 1 Recessionary Gap

  • What occurs when actual output is less than potential output?

    A recessionary gap occurs when actual output (Y) is less than potential output (Y*).
  • What does a recessionary gap indicate about resources?

    Resources like workers, machines, and land are underutilized due to insufficient demand.
  • Why are resources not fully utilized during a recessionary gap?

    Resources are not fully utilized because there is not enough demand for goods and services.
  • 2 Keynesian Model

  • What are 'PRESET PRICES'?

    Firms typically maintain fixed prices and adjust production to meet demand.
  • Why do firms use preset prices?

    Constantly changing prices is costly and inconvenient due to MENU COSTS.
  • What are examples of MENU COSTS?

    Examples include determining new prices and updating systems and menus.
  • 3 Planned Aggregate Expenditure (PAE)

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  • What are the four components of planned aggregate expenditure?

    The four components are C, I, G, and NX.
  • What does C represent in planned aggregate expenditure?

    C stands for consumption, which is household spending on goods and services.
  • What does I^p stand for in the context of PAE?

    Planned investments made by firms regarding capital goods.
  • What does G refer to in planned aggregate expenditure?

    G indicates government spending on public services and infrastructure.

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