Chapter 8 Flashcards Preview

Macroeconomics > Chapter 8 > Flashcards

Flashcards in Chapter 8 Deck (19)
Loading flashcards...
1
Q

Who was John Maynard Keynes?

A

British economist whose influential work offered and explanation of the Great Depression and suggested, as a cure, that the government should play and active role in the economy

2
Q

what are classical economist?

A

a group of economists whose theory dominated economic thinking from the 1770s to the Great Depression. They believed recessions would naturally cure themselves because the price system would automatically restore full employment.

3
Q

What is Say’s Law?

A

the theory that supply creates its own demand

4
Q

The ___________ economist believed that a continuing depression is impossible because markets eliminate shortages or surpluses

A

classical

5
Q

in the classical view, unemployment is the result of a short-lived adjustment period in which wages and prices decline or people voluntarily choose not to work. This shows that……

A

there is a tendency for the economy to restore full employment over time

6
Q

what is a consumption function?

A

the graph or table that shows the amount households spend for goods and services at different levels of disposable income

7
Q

what is dissaving?

A

the amount by which personal consumption expenditures exceed disposable income

8
Q

what is autonomous consumption?

A

consumption that is independent of the level of disposable income

9
Q

what is saving?

A

the part of disposable income households do not spend for consumer goods and services

10
Q

what is marginal propensity to consume (MPC)?

A

the change in consumption resulting from a given change in real disposable income

11
Q

what is the equation for MPC?

A

MPC = change in consumption / change in real disposable income
aka ^C/^Yd

12
Q

what is marginal propensity to save(MPS)?

A

the change in saving resulting from a given change in real disposable income
aka ^S/^Yd

13
Q

what equation expresses the points along the consumption function?

A

C = a + bYd

14
Q

what is the sole cause of a movement along the consumption function?

A

a change in real disposable income

15
Q

what is the cause of a shift or relocation in the consumption schedule?

A

when a factor other than real disposable income changes

16
Q

what is the wealth effect?

A

a shift in the consumption function caused by a change in the value of real and financial assets

17
Q

what is an investment demand curve?

A

the curve that shows the amount businesses spend for investment goods at different possible rates of interest

18
Q

what is an autonomous expenditure?

A

spending that does not vary with the current level of disposable income

19
Q

what is an aggregate expenditure?

A

the function that represents total spending in an economy at a given level of real disposable income