Term
| marginal propensity to consume/MPC |
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Definition
| the increase in consumer spending when disposable income rises by $1 |
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Term
| marginal propensity to save/MPS |
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Definition
| the increase in household savings when disposable income rises by $1 |
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Term
| autonomous change in aggregate spending |
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Definition
| an initial change in the desired level of spending by firms, households, or government at a given level or real GDP |
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Term
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Definition
| the ratio of the total change in real GDP caused by an autonomous change in aggregate spending to the size of that autonomous change |
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Term
| any _____, a change in spending that is not caused by a change in real GDP, generates a chain reaction in which the initial change in real GDP leads to changes in consumer spending, leading to further changes in real GDP, & so on |
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Definition
| autonomous change in aggregate spending |
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Term
| the total size of the change in real GDP depends on the size of the _____ |
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Definition
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|
Term
assuming that there are no taxes & no trade, the multiplier is equal to:
1/(1-_____) |
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Definition
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Term
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Definition
| an equation showing how an individual household's consumer spending varies with the household's current disposable income |
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Term
| aggregate consumption function |
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Definition
| the relationship for the economy as a whole between aggregate current disposable income & aggregate consumer spending |
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Term
| the _____ shows the relationship between an individual household's current disposable income & its consumer spending |
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Definition
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Term
| the _____ shows the relationship between disposable income & consumer spending across the economy |
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Definition
| aggregate consumption function |
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Term
| planned investment spending |
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Definition
| the investment spending that businesses intend to undertake during a given period |
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Term
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Definition
| a higher growth rate of real GDP leads to higher planned investment spending, but a lower growth rate of real GDP leads to lower planned investment spending |
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Term
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Definition
| stocks of goods held to satisfy future sales |
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Term
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Definition
| the value of the change in total inventories held in the economy during a given period |
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Term
| unplanned inventory investment |
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Definition
| when actual sales are more or less than businesses expected, leading to unplanned changes in inventories |
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Term
| actual investment spending |
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Definition
| the sum of planned investment spending & unplanned inventory investment |
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Term
| _____ is negatively related to interest rate & positively related to expected future real GDP |
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Definition
| planned investment spending |
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|
Term
| according to the _____, there is a positive relationship between planned investment spending & the expected future growth rate of real GDP |
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Definition
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Term
| firms hold _____ to sell in the future |
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Definition
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Term
| _____, a form of investment spending, can be positive or negative |
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Definition
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|
Term
| when actual sales are more or less than expected, _____ occurs |
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Definition
| unplanned inventory investment |
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Term
| _____ is equal to planned investment spending plus unplanned inventory investment |
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Definition
| actual investment spending |
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|
Term
| planned aggregate spending |
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Definition
| the total amount of planned spending in the economy |
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Term
| income-expenditure equilibrium |
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Definition
| when aggregate output, measured by real GDP, is equal to planned aggregate spending |
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Term
| income-expenditure equilibrium GDP |
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Definition
| the level of real GDP at which real GDP equals planned aggregate spending |
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Term
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Definition
| the diagram that identifies income-expenditure equilibrium as the point where the planned aggregate spending line crosses the 45-degree line |
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Term
| the economy is in _____ when planned aggregate spending is equal to real GDP |
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Definition
| income-expenditure equilibrium |
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Term
| at any output level greater than _____, real GDP exceeds planned aggregate spending & inventories are rising |
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Definition
| income-expenditure equilibrium GDP |
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Term
| after an autonomous change in planned aggregate spending, the economy moves to a new income-expenditure equilibrium through the inventory adjustment process, as illustrated by the _____ |
|
Definition
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