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Economics > Chapter 8 &9 > Flashcards

Chapter 8 &9 Flashcards

1
Q

Actual Investment

A

Actual Amount of Investment that takes place including unplanned changes in inventory

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2
Q

Aggregate Income

A

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

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3
Q

Aggregate Output

A

total quantity of goods & services produced in an economy in a given period

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4
Q

Aggregate Output (Income)

A

exact quality between aggregate output & aggregate demand

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5
Q

Aggregate Saving

A

Part of Aggregate Income that is not consumed

S=Y-C

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6
Q

Consumption Function

A

the relationship between consumption & income

C= a+ by

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7
Q

Equilibrium

A 
planned aggregate expenditure is equal to aggregate output
AS=AD
GDP=AE
GDP= C+I+G
Sum of Leakages = Sum of Injection
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8
Q

Exogenous Variable

A

variable that does not change depending on the state of the economy

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9
Q

Identity

A

Something that is always true

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10
Q

Marginal Propensity to Consume

A

Fraction of a Change in Income that is Consumed or Spent

=slope of the consumption function = change in C/Change in Y

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11
Q

Marginal Propensity to Save

A

fraction of a change in income that is saved
Change in S/Change in Y
MPS +MPC = 1

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12
Q

Multiplier

A

the ration of the change in equilibrium level of output to a change in some exogenous variable
1/MPS = 1/1-MPC

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13
Q

Planned Aggregate Expenditure

A

the total amount the economy plans to spend in a given period = consumption + planned Investment

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14
Q

Planned Investment

A

a firm’s planned additions to stock & capital

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15
Q

automatic stabilizer

A

revenue & expenditure items in federal budget that automatically change with the state of the economy to stabilize GDP

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16
Q

automatic destabilizer

A

revenue & expenditure items in federal budget that automatically change with the state of the economy to destabilize GDP

17
Q

balanced budget multiplier

A

the ratio of change in the equilibrium level of output to chagne in gov’t spending where change in gov’t spending is balanced by a change in taxes to as not to create any deficit, multiplier of 1

18
Q

budget deficit

A

difference between what a government spends & what it collects in taxes in a given period: G-T

19
Q

discretionary fiscal policy

A

changes in taxes or spending that are the result of deliberate changes in government policy

20
Q

disposable/after-tax income

A

total income - net taxes (Y-T)

21
Q

federal budget

A

budget of federal government

22
Q

federal debt

A

total amount owed by the federal government

23
Q

federal surplus (+) or deficit (-)

A

federal government receipts minus expenditures

24
Q

federal drag

A

negative effect on the economy occuring when average tax rates increase b/c taxpayers have moved into higher income brackets during an expansion

25
Q

fiscal policy

A

governments spending & taxing policies

26
Q

full-employment budget

A

what the federal budget would be if the economy were producing at the full-employment level of output

27
Q

government spending multiplier

A

ratio of change in the equilibrium level of output to a change in government spending = 1/MPS

28
Q

monetary policy

A

the behavior of the federal reserve concerning the nations money supply

29
Q

net taxes

A

taxes paid by firms & households to teh government minus the transfer payments made to households by the government

30
Q

privately held federal debt

A

privately held (no gov’t owned) debt of U.S. government

31
Q

structural deficit

A

deficit that remains at full employment

32
Q

tax multiplier

A

ratio of change in equilibrium level of output to a change in taxes
=MPC/MPS

33
Q

AE/Equilibrium in an economy with a Government

A

Y=C+I+G

34
Q

Unplanned Investment

A

Y-AE

34
Q

Savings Investment Approach to Equilibrium with a government

A

S+T = I +G

Economics (4 decks)

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