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14 Cards in this Set
- Front
- Back
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Menu Costs |
The costs that firms face in changing prices. |
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Permanent Income Hypothesis |
When individuals think about how much to consume, they look into the future and consider how much income they expect to earn in their lifetime. |
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Phillips Curve |
The trade-off between unemployment and inflation. |
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Stagflation |
When an economy experiences stagnant growth and high inflation at the same time. |
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Expenditure-Output Model |
A macroeconomic model in which equilibrium output occurs where the total or aggregate expenditures in the economy are equal to the amount produced; also called the "Keynesian cross model." |
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National Income (Y) |
The sum of all income received for producing GDP. |
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Marginal Propensity to Consume |
The share of an additional dollar of income that goes to consumption. |
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Marginal Propensity to Save |
The share of an additional dollar that goes to saving. |
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Consumption function |
The relationship between income and expenditures on consumption. |
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Marginal Propensity to Import |
The share of an additional dollar of income that goes to imports. |
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Recessionary Gap |
The gap in output between an economy in recession and potential GDP. |
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Inflationary Gap |
The gap between real GDP and potential GDP, when the level of output is above the level of potential GDP. |
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Multiplier Effect |
How a given change in expenditure cycles repeatedly through the economy, and thus has a larger final impact than the initial change. |
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Multiplier |
Total increase in aggregate expenditures divided by the original increase in expenditures. |
