Aggregate expenditure, Macroeconomics Video Lecture | Macro Economics - B Com

so in this video we're going to be
talking about the expenditure as I've
already written out a e equals to C plus
I plus G Plus X minus M now we've
already seen this kind of formula before
and that was with GDP and I just want to
know that
AE is like you use it with in
conjunction with the GDP and that's why
they're kind of similar now these two
definitions I've just written them all
I'm sure you read it on Thomas
expenditure it does not depend on real
income induced expenditures on real
income what that really means is that
for autonomous expenditure even we don't
have an income you will be spending on
oh you will be spending for these kind
of goods so for example like food would
be autonomous expenditure because you
will need it no matter what induced
expenditure for example video games it
varies with your income if you don't
have income you don't buy video games if
you do then you buy buy more and we're
going to go go through Nexus or just a
reminder that Y is the real actual
income so I'm gonna give just draw a
graph to show you what I kind of mean by
this so this is let's say that this is a
not this is when uh this is when we
don't have income so let's say that the
horizontal is y and the vertical is a
great expenditure how much we spend so
this is a not so even though we are no
income we continue spending because
because say this is food even though we
have no income coming and we still need
to spend together a necessity to live so
the slope of this would actually be the
change in aggregate expenditure over the
change in Y which is real income and
this is equal to Z which I will talk
about in a short while
and this would be our aggregate
expenditure line so like I said the
former AE action you have another
formula that formula is a AE equals a
not plus Z Y and this would be the
Thomas the Thomas expenditure I guess on
Miss tano miss Z would be our fraction
of income fraction of income and Y would
be Y would be our our induced
expenditure so that's that so we can
make it so that Z is equal to change in
AE over the change in Y this kind of
equation is kind of similar to what we
see in algebra you know y equals MX plus
B where B is a time is armed with your
fraction of income and I guess X would
be our induced it's a it's what we learn
in high school math I suppose so to move
on I'm gonna be talking about the
changes in a knot and the first thing I
want to mention is that if a knot moves
a better drop graph so you get what I'm
saying so let's draw a graph here let's
draw a graph and Y is our horizontal
e is our vertical and let's say we have
two lines and this would be a not one
and you would have this another line
then let's have this be a not two
and this would be a two when we have
when you actually have income to spend
this would be a e1 so when a e nought
rises from from from a not one to AE to
a not to then our a shifts up a shifts
up from a1 from a1 to a2 so essentially
when the 180 not well rises from a1 to
82 so it rises from here to here then
the whole and the whole curve will shift
because imagine this you have you have
no income and your spending if what
you're good at your spending on is a
necessity and the price rise is that you
still have to spend yet still have to
pay that price no matter what and when
you actually have income to spend then
you keep on paying at these points in
the curve and if if the good that you're
spending done is necessity that you're
spending on increases then you're
spending when you have income will also
increase over a e1 moves to a e2 so
that's why the curve will shift when we
when there's a change in any not now the
second thing is what happens when
there's a change
in Z a change in Z and I think I forgot
to mention yes I did
Zed Zed here this formula is actually
your marginal propensity your marginal
propensity to spend to spend so why not
what is the Martian a marginal entities
to spend it's a concept that the
increase in your personal suspending
your consumption in other words it
happens when you have more money to
spend so that's the kind of concept
behind so for example if you earn a one
extra dollar of disposable income and
your marginal propensity to spend is
like is point six on the dollar
then you will spend on sixty cents and
you'll save 40 cents and that's the kind
of idea that marginal propensity to
spend actually offers so what actually
happens when there's a change in Zed so
this is what happens so if Z Rises z
rises from Z 1 Z 1 to Z 2 then your
aggregate expenditure your aggregate
expenditure pivots pivots from a 1 from
AE 1 to AE 2 so how does that look like
on the graph so this let's say that this
is your slope your slope Z 1 so when our
marginal propensity to spend increases
from Z 1 to Z 2 then a pivots then that
means that when you when you earn more
and you spend more you actually pivot
from a novel not one and and it
increases and this would be this purple
line would be your slope is z2 that
would be your slope c2 and this would be
the Agra expenditure to for you because
you earn more but that doesn't
necessarily mean like your necessities
increased in price that means you just
got richer so in essence you would
consume more because you have more money
so we have this new line and this new
line is your a new aggregate expenditure
and z2 would be a new slope and that's
pretty much it for that's pretty much
what I want to tell you so far about
very expenditure please come back when
we talk about equilibrium