Term
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Definition
| explains how changes in spending can affect real GDP in the short run |
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Term
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Definition
| a positively sloped relationship between real consumption spending and real disposable income |
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Term
| Autonomous Consumption spending |
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Definition
the part of consumption spending that is independent of income
(also the vertical intercept of the consumption function) |
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Term
Marginal perpensity to consume
MPC |
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Definition
the amount by which consumption spending rises when disposable income rises by one dollar
change in consumption
change in disposable income |
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Term
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Definition
| a line showing aggregate consumption spending at each level of income or GDP |
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Term
| aggregate expenditure (AE) |
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Definition
| the sum of spending by households, business firms, the goverment, and foreigners on final goods and services produced in the United States |
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Term
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Definition
| in the short run, the level of output at which output and aggregate expenditure are equal |
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Term
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Definition
the amount by which equilibrium real GDP changes as a result of a one-dollar change in autonomous consumption, investment spending, government purchases, or net exports
1
(1-MPC) |
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Term
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Definition
forces that reduce the size of the expenditure multiplier and diminish the impact of spending changes
- taxes, transfers, interest rates, imports, foreward looking behavior
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Term
| Countercycical Fiscal policy |
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Definition
| a change in goverment purchases or net taxes designed to reverse or prevent a recession or a boom |
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