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5 Cards in this Set
- Front
- Back
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Aggregate expenditures-output model
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The model that determines the equilibrium level of real GDP by th intersecion of th eaggregate expenditures and aggregate outputs (and income) curves.
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Spending multiplier
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The ratio of the change in real GDP to an intitial change in any component of aggregate expenditures, including consumption, investment, government spending, and net exports. As a formula, the spending multiplier equals 1/(1-MCP) or 1/MPS
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Recessionary gap
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The amount by which aggregate expenditures must be increased to achive full-employment equilibrium
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Tax multiplier
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The change in aggregate expenditures (total spending) resulting from an initial change in taxes. As a formula, the tax multiplier equals 1- spending multiplier
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Inflationary gap
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The amount by which aggregate expenditures must be decreased to achieve full-amployment equilibrium
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