Chapter 23 - Aggregate Expenditure and Equilibrium Output Flashcards Preview

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Flashcards in Chapter 23 - Aggregate Expenditure and Equilibrium Output Deck (21)
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1
Q

aggregate output

A

The total quantity of goods and services produced (or supplied) in an economy in a given period.

2
Q

aggregate income

A

The total income received by all factors of production in a given period.

3
Q

aggregate output (income) (Y)

A

A combined term used to remind you of the exact equality between aggregate output and aggregate income.

4
Q

consumption function

A

The relationship between consumption and income.

5
Q

marginal propensity to consume (MPC)

A

That fraction of a change in income that is consumed, or spent.

6
Q

aggregate saving (S)

A

The part of aggregate income that is not consumed.

7
Q

identity

A

Something that is always true.

8
Q

marginal propensity to save (MPS)

A

That fraction of a change in income that is saved.

9
Q

planned investment (I)

A

Those additions to capital stock and inventory that are planned by firms.

10
Q

actual investment

A

The actual amount of investment that takes place; it includes items such as unplanned changes in inventories.

11
Q

equilibrium

A

Occurs when there is no tendency for change. In the macroeconomic goods market, equilibrium occurs when planned aggregate expenditure is equal to aggregate output.

12
Q

planned aggregate expenditure (AE)

A

The total amount the economy plans to spend in a given period. Equal to consumption plus planned investment:
AE (=–) C+I.

13
Q

multiplier

A

The ratio of the change in the equilibrium level of output to a change in some exogenous variable.

14
Q

exogenous variable

A

A variable that is assumed not to depend on the state of the economy—that is, it does not change when the economy changes.

15
Q

S

A

S (=–) Y-C

16
Q

MPC

A

MPC (=–) slope of consumption function (=–) (change in C) / (change in Y)

17
Q

MPC + MPS

A

MPC + MPS (=–) 1

18
Q

AE

A

AE (=–) C + I

19
Q

Equilibrium condition

A

Y = AE or Y = C + I

20
Q

Saving/investment approach to equilibrium

A

S = I

21
Q

Multiplier

A

Multiplier (=–) 1 / MPS (=–) 1 / (1 - MPC)