Aggregate demand issues

As a primer, watch this short video by Khan Academy about the business cycle. Then, to get a deeper understanding, read the short articles below:

  • Read this section on the “Five Sector Model”, including the table listing leakages and injections. You should be able to write a formula equating the leakages to the injections and place each item into the expanded, comprehensive, and important version of the circular flow model.
  • Read this article about the “simple multiplier”. You should be able to use the formula from this article to calculate the multiplier’s numeric value given MPC = 0.80. The result suggests an outcome such as income or GDP increases about five times the amount of a change in consumer expenditures, as articulated in the readings.

Let us know what your think by posting and sharing your thoughts on WENotes below. For example, complete the following statements:

  • I find the calculations complicated because …..
  • I didn’t realise that ….’
  • When someone talks about the business cycle they mean …
  • or share any relevant thoughts and ideas you have on the readings or video.

You must be logged in to post to WEnotes.

Note: Your comment will be displayed in the course feed.