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10 Cards in this Set
- Front
- Back
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Equilibrium
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Refers to a situation in which neither consumers nor firms have any incentive to change their behavior. They are content to continue with things as they are.
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Expenditure Schedule
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Shows the relationship between national income (GDP) and total spending
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Induced Investment
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The part of investment spending that rises when GDP rises and falls when GDP falls
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Income Expenditure
(45' line diagram) |
Plots total real expenditure (vertical axis) against real incoem (horizontal axis). The 45' line marks off points where income and expenditure are equal
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Aggregate demand curve
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The quantity of domestic product that is demanded at each possible value of the price level
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Recessionary Gap
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The amount by which the equilibrium level of real GDP falls short of potential GDP
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Inflationary Gap
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The amount by which equilibrium real GDP exceeds the full-employment level of GDP.
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Multiplier
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The ratio of the change in equilibrium GDP (Y) divided by the original change in spending that causes the change in GDP
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Induced Increase in Consumption
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An increase in consumer spending that stems from an increase in consumer incomes. It is represented on a graph as a movement along a fixed consumption function
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Autonomous Increase in Consumption
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An increase in consumer spending without any increase in consumer incomes. It is represented on a graph as a shift of the entire consumption function.
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