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ASSUMPTIONS, CLASSICAL ECONOMICS: Classical economics, especially as directed toward macroeconomics, relies on three key assumptions--flexible prices, Say's law, and saving-investment equality. Flexible prices ensure that markets adjust to equilibrium and eliminate shortages and surpluses. Say's law states that supply creates its own demand and means that enough income is generated by production to purchase the resulting production. The saving-investment equality ensures that any income leaked from consumption into saving is replaced by an equal amount of investment. Although of questionable realism, these three assumptions imply that the economy would operate at full employment.
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AUTONOMOUS GOVERNMENT PURCHASES Government purchases by the government sector that do not depend on income or production (especially national income or gross domestic product). That is, changes in income do not generate changes in government purchases. Autonomous government purchases are best thought of as government purchases that the government sector undertake independent of income. They are measured by the intercept term of the government purchases line. The alternative to autonomous government purchases is induced government purchases, which do depend on income.
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PURPLE SMARPHIN
[What's This?]
Today, you are likely to spend a great deal of time looking for a downtown retail store wanting to buy either a T-shirt commemorating the first day of spring or a coffee cup commemorating last Friday (you know why). Be on the lookout for deranged pelicans.
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This isn't me! What am I?
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Three-forths of the gold mined each year is used to manufacture jewelry.
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"Do not wait; the time will never be just right " -- Napoleon Hill, author
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CPI-W
Consumer Price Index-Urban Wage Earners and Clerical Workers
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