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40 Cards in this Set
- Front
- Back
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Consumption Function
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the relationship between consumption and income, other things constant
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Marginal propensity to consume
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the fraction of a change in income that is spent on consumption; the change in consumption divided by the change in income that caused it
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Marginal Propensity to save
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the fraction of achage in teh income tha tis saved; the change in saving divided by the change in incom ethat caused it
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saving function
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the relationship between saving and income, other things constant
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net wealth
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tha value of a assets minus liabilities
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life-cycle model of consumption and saving
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young people borrow, middle agers pay off debts and save, and older peole draw down their savings; on average net savings over a lifetime is small
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investment function
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the relationship between the amount businesses plan to invest and the economoy's income, other things constant
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autonomous
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a term that means independent; for examply autonomous investmet is ndependent of income
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government purchase function
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the relationhsip between government purchaes and the economy's income , otehr tings constant
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net export function
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the relationship between net exports nd the economy's income, other things constant
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planned investment
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the amount of investment that firms plan to undertake during the year
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actual investment
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the amount of investment actually undertaken; equals planned investment plus unplanned changes in inventories
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aggregat expenditure line
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a relationship showing, for a given price level, planned spending at each income, or real GDP; the total of C+I+G+X-M at each income or real GDP
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income expenditure model
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a relationship between aggregate ncome and aggregate spending that determines, for a given price leve, where the amount people plan to spend equals the amoung produced
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simple spending multiplier
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the ration of a change in real GDP demended to the intial change in spending tha tbrough tit about; the numerical value of the simple spending multiplier is 1/(1-MPC); called "simple" because only consumption varies with income
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DI is equal to what?
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DI=Consumption + Savings
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Consumption is equal to what?
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C=f(y)=a+by
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As Disposable Income increases what happens to Consumption?
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increases
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MPC= what?
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change in consupmtion / change in DI
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MPC is what for the consumption function?
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slope
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MPS is what?
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change in savings / change in DI
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MPS is what for the savings function?
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slope
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Agg. Expenditure = what?
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C+I+G+(X-M)
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What causes consumption function to shift?
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Net Wealth, Price level, Interest Rate, Expectations
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As net wealth increases consumption...
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increases
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Price level increases, consumption...
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decreases
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interest rate increases, consumption
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decreases
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expectations increase, consumption
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increases
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net wealth = what?
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assets - liablilites
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What will move a point on the consumption function?
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change in income
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What 3 things involve investment>?
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New factories and equipment
New housing net change in inventoreis |
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As interest rate (i) increases, Investment (I) what?
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decreases
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Investment depends on what?
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market interest rate
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Investment spending is autonomous of what?
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DI
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Government purchases function relates to what?
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level of income
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If transfer payments increase income...
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income decreases
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Exports dont depend on what?
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US Income
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Imports vary by level of what?
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DI
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what are the non-income determinants of net exports?
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price level (US)
price level abroad interest rates foreign income levels exchange rates between dollar |
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Actual investment = what?
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planned investment + unplanned change in inventory
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