Macroeconomics Chp 8 and 9
Terms
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- The total quanitiy of goods and servies produced in an economy in a given period
- Aggregate output
- The total income received by all factors of production in a given period
- Aggregate income
- A combined term used to remind you of the exact equality between aggregate output and aggregate income
- Aggregate output (income) (Y)
- The part of its income that a household does not consume in a given period. Distinguished from savings, which is the current stock of accumulated saving
- Saving ($)
- Something that is always true
- Identity
- The relationship between consumption and income
- Consumption function
- That fraction of change in income that is consumed or spent
- Marginal propensity to consume (MPC)
- That fraction of a change in income that is saved
- Marginal propensity to save (MPS)
- Purchases by firms of new building and equipment and additions to inventories all of which add to firms\' capital stock
- Investment
- Those additions to capital stock and inventory that are planned by firms
- Planned investment
- The actual amount of investment that takes place; it includes items such as unplanned changes in inventories
- Actual investment
- The total amount the economy plans to spend in a given period. Equal to consumption plus planned investment AE= C + I
- Planned aggregate expenditure
- Occurs when there is no tendency for change
- Equilibrium
- The ratio of the change in the equilibrium level of output to change in some autonomous variable
- Multiplier
- A variable that is assumed not to depend on the state of the economy...does not change when the economy changes
- autonomous cariable
- Total income minus net taxes
- disposable income
- The difference between what a government spends and what it collects in taxes in a given period G-T
- Budget deficit
- The ratio of change in the equilibrium level of output to a change in taxes
- Tax multiplier
- The budget of the federal government
- Federal budget
- Federal government receipts minus expenditures
- Federal surplus or deficit
- The privately held debt of the U.S. government
- Privately held federal debt
- Revenue and expenditure intems in the federal budget that automatically chage with the state of the economy in such a way as to stabilize GDP
- Automatic stabilizers
- The negative effect on the economy that occurs when average tax rates increase because taxpaers have moved into higher income brackets during and expansion
- Fiscal drag
- The deficit that remains at full employment
- Structural deficit
- The deficit that occurs because of a downturn in the business cycle
- Cyclical deficit