Econ Study Cards For Chapter 10

Front 1

multiplier effect

Back 1

a $5 bil. change in investment spending led to a $20 bil. change in output and income. The multiplier effect is the change in a component of aggregate expenditurers that leads to a larger change in equilibrium.

Front 2

multiplier equations

Back 2

Multiplier=(change in real GDP)/(initial change in spending) or Change in GDP=Multiplier x initial change in spending

Front 3

lump-sum tax

Back 3

a tax of constant amt. or, more precisely, a tax yielding the same amt. of tax revenue at each level of GDP

Front 4

balanced budget multiplier

Back 4

Equal increases in government spending and in taxation increase the equilibrium GDP. If G and T are each increased by a particular amt, the equilibrium level of real output will rise by the same amt.

Front 5

recessionary gap

Back 5

the amt by which aggregate expenditures at the full-employment GDP fall short of those required to achieve the full employment GDP. This deficiency of spending contracts or depresses the economy.

Front 6

inflationary gap

Back 6

the amt by which an economy's aggregate expenditures at full-employment GDP exceed those just necessary to achieve full-employment GDP.