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6 Cards in this Set

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multiplier effect
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.
multiplier equations
Multiplier=(change in real GDP)/(initial change in spending) or Change in GDP=Multiplier x initial change in spending
lump-sum tax
a tax of constant amt. or, more precisely, a tax yielding the same amt. of tax revenue at each level of GDP
balanced budget multiplier
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.
recessionary gap
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.
inflationary gap
the amt by which an economy's aggregate expenditures at full-employment GDP exceed those just necessary to achieve full-employment GDP.