keynasian gay shit quiz notes Flashcards
what is the simple multiplier
1 / (1-Z) make sure when manipulating to keep the 1-z in brackets
what will happen to peoples desired savings if they expect the economy to grow in the future
if they think the economy is gonna grow they will not leave there money in a savings account they will invest that money. ( investing isnt considered saving)
what is the effect on the AE curve of a increase in tax rate
it will make the curve flatter
what is the slope of the AE function
positive and less then 1 0 < AE < 1
what does a increase in autonomous AE cause all other things equal
this causes the equilibrium demand determined national income larger because for autonomous AE to increase that means people are wealthier so they are spending more money GDP rises
increase in propensity to import effect on the simple multiplier
it makes the simple multiplier smaller because the MPC is increasing
in a closed economy if average propensity to consume is 1 what is the savings
the savings will be zero
effect of a increase in government purchases of goods and services
it will shift the curve upwards
what does average propensity to consume of 1 mean
it means that all there disposable income is being consumed (spent)
in a model with demand determined output at equilibrium level of national income
desired aggregate expenditure will equal total output because the demand determines the output so they only make as much as there is a demand for
what makes national income demand determined
when there is a large scale unemployment of resources in the economy , firms are price setters , firms have excess capacity
what is the effect of a decrease in household wealth
a downward shift in consumption
what levels of government collect taxes
all levels of government
why is it when real national income increases net exports decrease
because more of the goods are being consumed by that countries people so there isn’t as much of a need to ship the goods
what is y in the tax revenue equation
national income
