# Macro Economics Chapter 09 Key Words Flashcards

aggregate expenditures-output model

The model that determines the equilibrium level of real GDP by the intersection of the aggregate expenditures and aggregate output (and income) curves.

inflationary gap

The amount by which the aggregate expenditures curve must be decreased to achieve full-employment equilibrium.

recessionary gap

The amount by which the aggregate expenditures curve must be increas ed to achieve full-employment equilibrium.

spending multiplier (SM)

The ratio of the change in real GDP to an initial change in any component of aggregate expenditures, including consumption, investment, government spending, and net exports. As a formula, the spending multiplier equals 1/(1 - MPC) or 1/MPS.

tax multiplier

The change in aggregate expenditures (total spending) resulting from an initial change in taxes. As a formula, the tax multiplier equals 1 - spending multiplier.