Calcualtions Gpep

In: Other Topics

Submitted By start1
Words 2519
Pages 11
Lecture 6 and 7:
The Aggregate Expenditures Model
Reference - Chapter 7

learning OBJECTIVES

1. The factors that determine consumption expenditure and saving. 2. The factors that determine investment spending. 3. How equilibrium GDP is determined in a closed economy without a government sector. 4. What the multiplier is and its effects on changes in equilibrium GDP. 5. How adding international trade affects equilibrium output. 6. How adding the public sector affects equilibrium output. 7. The distinction between equilibrium versus full-employment GDP.

I. Introduction

A. This chapter focuses on the aggregate expenditures model. We use the definitions and facts from previous chapters to shift our study to the analysis of economic performance. The aggregate expenditures model is one tool in this analysis. Recall that “aggregate” means total.

B. As explained in this chapter’s Last Word, the model originated with John Maynard Keynes (Pronounced Canes).

II. Simplifying Assumptions for the Simple Model

A. We assume a “closed economy” with no international trade.

B. No Government. C. Although both households and businesses save, we assume here that all saving is personal.

D. Depreciation and net foreign income are assumed to be zero for simplicity.

E. There are two reminders concerning these assumptions. 1. They leave out two key components of aggregate demand (government spending and foreign trade), because they are largely affected by influences outside the domestic market system.

2. With no government or foreign trade, GDP, personal income (PI), and disposable income (DI) are all the same.

III. The Aggregate Expenditures Model: Consumption and Saving

A. The theory assumes that the level of output and employment…...

Similar Documents

What Is Bar?

...October 24-November 2, 1991 at the Manila Pavillon 1992 • Updating NAREA • BAR as secretariat of DA R&D Rationalization Program • Implementation of National Fisheries Research Program (NFRP) and National Fisheries Outreach Plan (NFOP) 1993 • Development of Key Commercial Crops Development Program (KCDDP) • Completed the DA Research Monitoring System (DARMS) which serve as database for basic information on researches conducted by DA • Implementation of manpower development program for fisheries 1994 • The Philippines hosted the 3rd Asian Farming Systems Symposium where BAR acted as the secretariat • BAR coordinated, monitored and funded programs for the Grains Production Enhancement Program (GPEP) - Production Technology Component (R&D) and various projects and activities under the Fisheries Sector Program (FSP) • Updated NAREA 2000 1995 • Gintong Ani for Corn, Gintong Ani Program(GAP) -- High Value Commercial Crops, and the Philippine Integrated Pest Management Program (KASAKALIKASAN) were the alternative sources of funds for other R&D activities of the Bureau. 1996 • The medium term implementation of the Gintong Ani for Corn R&D at the national level was entrusted to the Bureau. • The Bureau implemented the Corn-Techno-Demo Projects. • The DA-Research Monitoring System was redesigned to run via the Internet and to gather pertinent information for management purposes, especially for......

Words: 7358 - Pages: 30

Finance Investment Appraisal

...000 160.000 315.000 -11,61 PBP 0 1 2 3 Simple Payback Period Airport B Year Net cash $ -150.000 120.000 120.000 120.000 -1,25 Cumulative $ -150.000 -30.000 90.000 210.000 -15,00 PBP 0 1 2 3 Simple Payback Period Airport C Year Net cash $ -150000 50000 50000 50000 -1 3 years Cumulative $ -150000 -100000 -50000 0 3 1 year and 3 month initial investment* 150000 150000/155000= 0,97 0,97*12=11,61 December PBP PBP * month PBP * calendar month 30000/120000=-0,25-1=(-1,25)*(1)=1,25 1,25*12=15 15 month = 1 year and 3 month (March) PBP PBP * month PBP * calendar month (-5000/5000)= -1 = -1*(-1)=1 +2 =3 3*12=36 3 years PBP PBP * month PBP * calendar month Investment covered within the first year of business *applicable for all PBP calcualtions Investment covered after the first year of business 12 Appendix E NPV Airport A Year 0 1 2 3 Net present value Cash flow -$150.000 $155.000 $155.000 $155.000 df (12 %)* 1 0,893 0,797 0,712 Discounted cash flow (PV) -$150.000 $138.415 $123.535 $110.360 $222.310 use of WACC* Example 1 1/(1+r)^1 1/(1+r)^2 1/(1+r)^3 (1/1+0,12)= 0,89285714=0,893 (1/1+0,12)^2= 0,79719387755102=0,797 (1/1+0,12)^3= 0,711780247813411=0,712 Use of Present value factor table available at Proctor (2006) p. 214 Alternatively calculated see example 1 Appendix E NPV Airport B Year 0 1 2 3 Net present value NPV Airport C Year 0 1 2 3 Net Present Value Cash flow -$150.000 $50.000 $50.000 $50.000 df (12 %) 1 0,893 0,797 0,712 Discounted cash flow......

Words: 4658 - Pages: 19

Foreign Exchange Market in Trinidad & Tobago

...other countries. Fig. 5 Approximate figure for Oct’15 Import cover Data Sourced from CBTT Data Center 3.6 Balance of Payments As stated in the Budget presentation for 2015 T&T can expect an overall Balance of Payments Deficit for 2015 and a loss in official reserves of US$720M, this data was not available to be analyzed but an assumption can be made that this overall deficit is mainly caused by an increased deficit on the capital and financial account. This is greatly different to the proposed figures for 2014 (see appendix 3) 4.0 NOMINAL AND REAL U.S. EXCHANGE RATE In Fig.6 we see the relationship between Nominal and Real US Selling Rate (see appendix 4) Fig.6 *See appendix for calcualtion *While we are aware that US Inflation and TT Inflation is calculated based on a different basket of goods in determining the Consumer Price Index (C.P.I.), for the purpose of this project, to be able to compare and analyze exchange rates we opt to use headline inflation of both countries in this and our further discussions. The real effective exchange rate is almost always above the nominal exchange rate Fig.6, the main reason for this disparity in exchange rate is the fact that the CBTT maintains a managed float system, where the nominal exchange rate is not solely determined by the forces of demand and supply but rather it is set by the CBTT through their policy of a managed floating system; this therefore is manipulation of......

Words: 1452 - Pages: 6