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5 Cards in this Set

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Aggregate expenditures-output model
The model that determines the equilibrium level of real GDP by th intersecion of th eaggregate expenditures and aggregate outputs (and income) curves.
Spending multiplier
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
Recessionary gap
The amount by which aggregate expenditures must be increased to achive full-employment equilibrium
Tax multiplier
The change in aggregate expenditures (total spending) resulting from an initial change in taxes. As a formula, the tax multiplier equals 1- spending multiplier
Inflationary gap
The amount by which aggregate expenditures must be decreased to achieve full-amployment equilibrium