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Aggregate demand with inflation
In previous versions of Keynesian model, Components of aggregate demand did not depend on P. In IS-LM and in AS-AD models, investments depended on nominal interest rate R.
We argued that investment in fact relies on the real interest rate r but as R = r when πe = 0, we could make it a function of R.
When πe no longer is zero and real interest rate r = R - πe, we must write I(r) or I(R - πe). We must also write YD(Y, r) or YD(Y, R - πe). As inflation expectations are exogenous (given), it's still the case that YD relies negatively on R. Please note that if there is an equal increase in expected inflation and in nominal interest rate, real interest rate is unaffected and so is aggregate demand andinvestments.
Suppose a company is considering two independent projects, Project A and Project B. The cash outlay for Project A is $14,000. The cash outlay for Project B is $20,000. The company
Because discretionary Income = the money people have left over once they have paid for all of their basic needs (Food, Clothing, Shelter). You could also call it Disposable Inc
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how is it calculated
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