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A tax at a constant amount, a tax yielding the same amount of tax revenue at each level of GDP

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Recessionary Expenditure Gap (REG and How to Fix it

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Recessionary Expenditure Gap (REG and How to Fix it

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Being at full-employment but not producing enough to reach potential at full-employment.
The gap is the difference between the two and if you multiply the gap by the multiplier, you get the loss on GDP caused by the gap.

Fix it by raising GDP through lowering taxes by whatever REG/MPC equals.
Or by increasing government spending by the REG amount.

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Prosperity abroad- Enables the US to sell more exported goods, thus raising GDP
Exchange Rates- Depreciation of the dollar causes other countries to buy more of our exported goods, thus raising GDP.
Tariffs- Tariffs on goods increase GDP but also hurt other country's economies.

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Exports- Imports
Net Exports can be either positive or negative and directly effect aggregate expenditure

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C + Ig + Xn
(Consumption+ Investment+ Net Exports)

When an economy is open to international trade, part of its income will be spent on imports

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An initial change in investment spending can cause a magnified change in domestic output and income .

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= Changes in real GDP/initial change in spending
or
1/MPS

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Savings is a leakage or withdraw of spending from the economies circular flow of income. Investments are therefore injections in the economy. Investment is a potential replacement for leakage of saving.

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Equilibrium gdp is the only thing that can be sustained. Everything outside of that causes a cyclical effect on GDP: when less than equilibrium, spending exceeds GDP. When greater than equilibrium, spending is under GDP.

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This schedule shows the amount of (C+Ig) that will be spent at each possible output or income level

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The amount of savings that a business intends to invest

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Shows the amount of investment forthcoming at each level of GDP

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In a private closed economy, equilibrium is C + Ig = GDP (C+S=GDP)
Employment at that level is the equilibrium employment at that GDP value.