Term
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Definition
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Term
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Definition
| Relationship between consumption expenditure and disposable income |
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Term
| Marginal Propensity to Consume |
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Definition
a fraction of the change indisposable income that isspent on consumption
MPC= Change in consumption expenditure
change in disposable income
(found by getting the slope of the graph) |
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Term
| Other influences on the consumption expenditure |
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Definition
real interest rate
wealth/expected future income |
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Term
| Aggregate planned expenditure |
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Definition
| planned consumption expenditure plus plannedinvestmentplusplanned govt plus exports planned imports |
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Term
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Definition
components of the aggregate expenditure that do not change when real gdp changes
(eg investments) |
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Term
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Definition
| the components of aggregate expenditure minus imports |
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Term
| Real Interest Rate is directly related to______, inverse to ___________. |
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Definition
| savings, consumption expenditure |
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Term
When real interest rate falls
consumption expenditure increase/decrease
and savings increase/decrease. |
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Definition
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Term
| What factor influences imports in the short run |
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Definition
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Term
| Marginal propensity to import |
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Definition
| the fraction of an increase in real GDP that is spent on imports |
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Term
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Definition
| the level of aggregate expenditure when aggregate planned expenditure = real gdp |
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Term
| When autonomous expenditure increases aggregate expenditure and real gdp _____ |
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Definition
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Term
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Definition
| the amount by which a change in any component of autonomous expenditure is magnified or multiplied to determine the change that it generates in equilibrium expenditure and gdp |
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Term
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Definition
Change in equilibrium expenditure
change in autonomous expenditure |
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Term
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Definition
| because you have the initial increase in spendingplus the effect that a higher gdp has on other forms of expenditure |
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Term
| The greater the marginal propensity to consume, the larger/smaller the multiplier |
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Definition
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Term
| Do imports or income taxes make the multiplier smaller? |
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Definition
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Term
| The larger the marginal tax rate the smaller/larger is the change in disposable income and real gdp |
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Definition
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