Term
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Definition
| Real GDP minus net taxes, or after-tax real income. |
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Term
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Definition
| Spending on new goods and services to be used up out of a household's current income. Whatever is not consumed is saved. |
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Term
What kind of stuff does consumption include?
(2 things) |
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Definition
| Things such as buying food and going to a concert. |
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Term
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Definition
| The act of not consuming all of one's current income. Whatever is not consumed out of spendable income is, by definition, saved. |
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Term
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Definition
| Goods bought by households to use up, such as food and movies. |
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Term
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Definition
| Spending on items such as machines and buildings, which can be used to produce goods and services in the future. |
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Term
| What is the investment part of real GDP used for in the future? |
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Definition
| It will be used in the process of producing goods in the future. |
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Term
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Definition
| Producer durables, nonconsumable goods that firms use to make other goods. |
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Term
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Definition
| The relationship between amount consumed and disposable income. |
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Term
| What does a consumption function tell us? |
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Definition
| It tells us how much people plan to consume at various levels of disposable income. |
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Term
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Definition
| Negative saving, a situation in which spending exceeds income. This can occur what a household is able to borrow or use up existing assets. |
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Term
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Definition
| The line along which planned real expenditures equal real GDP per year. |
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Term
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Definition
| The part of consumption that is independent of the level of disposable income. Changes shift the consumption function. |
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Term
| average propensity to consume (APC) |
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Definition
| Real consumption divided by real disposable income; for any given level of real income, the proportion of total real disposable income that is consumed. |
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Term
| average propensity to save (APS) |
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Definition
| Real saving divided by real disposable income; for any given level of real income, the proportion of total real disposable income that is saved. |
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Term
| marginal propensity to consume (MPC) |
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Definition
| The ratio of the change in consumption to the change in disposable income.` |
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Term
| marginal propensity to save (MPS) |
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Definition
| The ratio of the change in saving to the change in disposable income. |
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Term
| By definition, the marginal propensity to save plus the marginal propensity to consume is always equal to what? |
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Definition
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Term
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Definition
| The stock of assets owned by a person, household, firm, or nation (net of any debts owed). |
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Term
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Definition
| A tax that does not depend on income. An example is a $1,000 tax that every household must pay, regardless of its economic situation. |
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Term
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Definition
| The ratio of the change in the equilibrium level of real GDP to the change in the autonomous real expenditures. |
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