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23 Cards in this Set

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The components of aggregate demand are:
Consumption, government spending, net exports, and investment.
Consumption
expenditure by consumers on final goods and services
aggregate demand
total quantity of output demanded at alternative price levels in a given time

all about spending
consumption
expenditure by consumers on final goods and services
disposable income
after tax income

disposable income= consumption + savings
Yd= C + S
savings
part of disposable income not spent on current consumption
average propensity to consume
total consumption in a given period divided by total disposable income

APC = total consumption
-------------------------
total disposable income
= C/Yd
Marginal propensity to consumer
fraction of each additional (marginal) dollar of disposable income spent on consumption
"b" in consumption function
MPC=
Change in consumption
----------------------------------------
Change in disposable income
Marginal propensity to save
fraction of each additional dollar of disposable income not spent on consumption
MPS = 1-MPC
MPC+MPS=1
Wealth effect
change in consumer spending caused by a change in value of owned assets
consumption function
relationship indicating the rate of desired consumer spending at various income levels

C= a+bYd
Consumption function variables
C= current consumption
a= autonomous consumption
b= marginal propensity to consume
Yd= disposable income
dissaving
when consumption is greater than current income
investment
expenditures on (production of) new plants, equipment, and structures in a given time, plus changes in business inventory
full-employment GDP
value of total output (Real GDP) produced at full-employment
recession GDP gap
amount by which the equilibrium GDP fall short of full-employment GDP

low AD
Cyclical unemployment
unemployment due to lack of job vacancies
inflationary GDP gap
the amount by which the equilibrium exceeds the full-employment GDP

High AD
demand-pull inflation
increase in the price level due to excessive AD
determinants of consumption and savings
expectations
wealth effect
credit - interest rates
taxes
disposable income
non-income determinants of consumption that shift the consumption schedule
expectations
wealth
interest rates
debt