Chapter 9 Aggregate Demand

Front 1

The components of aggregate demand are:

Back 1

Consumption, government spending, net exports, and investment.

Front 2

Consumption

Back 2

expenditure by consumers on final goods and services

Front 3

aggregate demand

Back 3

total quantity of output demanded at alternative price levels in a given time

all about spending

Front 4

consumption

Back 4

expenditure by consumers on final goods and services

Front 5

disposable income

Back 5

after tax income

disposable income= consumption + savings
Yd= C + S

Front 6

savings

Back 6

part of disposable income not spent on current consumption

Front 7

average propensity to consume

Back 7

total consumption in a given period divided by total disposable income

APC = total consumption
-------------------------
total disposable income
= C/Yd

Front 8

Marginal propensity to consumer

Back 8

fraction of each additional (marginal) dollar of disposable income spent on consumption
"b" in consumption function

Front 9

MPC=

Back 9

Change in consumption
----------------------------------------
Change in disposable income

Front 10

Marginal propensity to save

Back 10

fraction of each additional dollar of disposable income not spent on consumption

Front 11

MPS = 1-MPC

Back 11

MPC+MPS=1

Front 12

Wealth effect

Back 12

change in consumer spending caused by a change in value of owned assets

Front 13

consumption function

Back 13

relationship indicating the rate of desired consumer spending at various income levels

C= a+bYd

Front 14

Consumption function variables

Back 14

C= current consumption
a= autonomous consumption
b= marginal propensity to consume
Yd= disposable income

Front 15

dissaving

Back 15

when consumption is greater than current income

Front 16

investment

Back 16

expenditures on (production of) new plants, equipment, and structures in a given time, plus changes in business inventory

Front 17

full-employment GDP

Back 17

value of total output (Real GDP) produced at full-employment

Front 18

recession GDP gap

Back 18

amount by which the equilibrium GDP fall short of full-employment GDP

low AD

Front 19

Cyclical unemployment

Back 19

unemployment due to lack of job vacancies

Front 20

inflationary GDP gap

Back 20

the amount by which the equilibrium exceeds the full-employment GDP

High AD

Front 21

demand-pull inflation

Back 21

increase in the price level due to excessive AD

Front 22

determinants of consumption and savings

Back 22

expectations
wealth effect
credit - interest rates
taxes
disposable income

Front 23

non-income determinants of consumption that shift the consumption schedule

Back 23

expectations
wealth
interest rates
debt