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29 Cards in this Set
- Front
- Back
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shows the equilibrium income is equal to the product of the autonomous component of aggregate expandature and the multiplier |
Algebraic derivation |
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- is expansionary if it lends to raise income |
Fiscal policy |
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- increase in equilibrium income exceeds the increase in government spending |
Multiplier effects |
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- an equal increase in government spending and income taxes leads to an equal increase in |
Equilibrium income |
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an increase in income taxes leads to a fall in |
Disposable income |
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since this leads to a fall in consumption spending the final result is a. |
Construction in income |
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presents the government spending and sources of finance |
Government budget |
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if its spending exceeds its revenues |
Budget deficit - |
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to pay for the the government borrows from domestic and or external sources |
deficit |
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is one that includes households firms and government |
Three sector economy |
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is such an economy requires us to take note of three important points |
Income determination |
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depends on disposable income |
Consumption spending |
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can be allocated between consumption and savings |
Disposable income |
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is equal to the sum of consumption investment and government spending |
Aggregate expenditure |
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requires the quality between income and aggregate expenditure |
Equilibrium |
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condition is the quality between the sum of savings and income taxes and the sum of investment and government spending |
Alternative equilibrium |
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in government spending tends to raise aggregate expenditure |
Increase |
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an increase in income taxes leads to a fall in |
Disposable income |
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since this leads to a fall in consumption spending the final result is a. |
Construction in income |
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an equal increase in government spending and income taxes leads to an equal increase in |
Equilibrium income |
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that is equal to unity |
balanced budget multiplier |
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increase in equilibrium income exceeds the increase in government spending |
Multiplier effects |
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refers to the government use of spending and taxation to influence the level of economy activity |
Fiscal policy |
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is expansionary if it lends to raise income |
Fiscal policy |
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exist when aggregate expenditure is greater than income the full employment level of output |
Deflationary gap |
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to eliminate deflationary gap the government can pursue a |
Contractionary fiscal policy |
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- exist when aggregate expenditure is greater than income at the full employment level an inflationary gap tend to raise the general price level |
Inflationary gap |
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to eliminate the inflationary gap the government can pursue a |
Contractionary fiscal policy |
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shows the equilibrium income is equal to the product of the autonomous component of aggregate expandature and the multiplier |
Algebraic derivation |
