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30 Cards in this Set
- Front
- Back
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what is consumption directly related to
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disposable income
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when households plan to consume their entire income is the ________ _______ _______
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national breakeven point
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when does dissavings occur
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when you spend more than you own
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how can dissavings happen
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when you borrow money or sell assets
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average propensity to save/consume
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how much you save out of avg income
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marginal propensity to save/consume
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how much you save out of bonuses
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disposable income =
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personal income - personal taxes
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what is the effect of a feeling of wealth (events)
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increase spending and reduce savings
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effect of real interest rates on households
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borrow more, consume more, save less
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equilibrium GDP
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when gdp = consumption + gross investments
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what causes consumption to be less than GDP
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savings
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under what circumstances would savings leakage not affect equilibrium GDP
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when savings = gross investment
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requirements for GDP equilibrium
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there is no unplanned change in inventory
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unplanned decrease in inventory... gdp
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goes up
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unplanned increase in inventory...gdp
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goes down
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taxation..... (3)
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-reduces disposable income
-lowers consumption and savings -reduces equilibrium GDP |
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EXPANSIONARY POLICY
want to prevent ______ |
recession
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CONTRACTIONARY POLICY
want to prevent ________ |
inflation
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contractionary policy causes a _____ with which you want to try to pay down _____ which will have an opposite effect on wanting to prevent inflation
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surplus
debt |
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expansionary policy causes a _____ which makes us need to (2). which of those two has an opposite effect on what we were trying to do
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deficit makes us need to borrow $ or print $. Borrowing $ has an opposite effect
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3 problems with timing and explain one
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recognition
operational administration - it takes them time to come up with a plan |
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in tough times, the state ________ spending
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decreases
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in tough times, the government ________ spending
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increases
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what is the crowding out effect
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rising interest rates will crowed out sections of the economy from being able to borrow #
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what is a more meaningful way to measure public debt other than simply stating the amount
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comparing debt to GDP
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largest holder of US debt is
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federal agencies
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the federal agency that holds the most of our debt is
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the social security trust fund
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primary burden of public debt
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interest
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multiplier effect
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the total funds generated by a set sum being inserted into the economy
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basic tools of fiscal policy
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spending and taxes
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