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12 Cards in this Set
- Front
- Back
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45* line
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A line along which the value of GDP (measured horizontally) is equal to the value of aggregate expenditures (measured vertically)
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Consumption schedule
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A schedule showing the amounts of households plan to spend for consumer goods at different levels of disposable income
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Saving schedule
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A schedule that shows the amounts households plan to save (plan not to spend for consumer goods), at different levels of disposable income.
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Break-even income
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The level of disposable income at shich households plan to consume (spend) all their income and to save none of it; also, in an income transfer program, the level of earned income at which subsidy payments become zero.
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average propensity to consume (APC)
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Fraction (or percentage) of disposable income that households plan to spend for consumer goods and services; consumption divided by disposable income.
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average propensity to save (APS)
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Fraction (or percentage) of disposable income that households save; saving divided by disposable income.
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marginal propensity to consume (MPC)
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The fraction of any change in disposable income spent for consumer goods; equal to the change in consumption divided by the change in disposable income
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marginal propensity to save (MPS)
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The fraction of any change in disposable in disposable income that households save; equal to the change in saving divided by the change in disposable income.
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wealth effect
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The tendency for people to increase their consumption spending when the value of their financial and real assets rises and to decrease their consumption spending when the value of those assets falls.
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expected rate of return
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The increase in profit a firm anticipates it will obtain by purchasing capital (or engaging in research and development); expressed as a percentage of the total cost of the investment (or R&D) activity.
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Investment demand curve
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A curve that shows the amounts of investment demanded by an economy at a series of real interest rates.
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Multiplier
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The ratio of a change in the equilibrium GDP to the change in investment or in any other component of aggregate expenditures or aggregate demand; the number by which a change in any such component must be multiplied to find the resulting change in the equilibrium GDP.
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