Macroeconomics Ch. 6 Vocab

Front 1

The relationship between consumption and income

Back 1

Consumption function

Front 2

As national income increases, consumption spending increases, but by diminishing amounts. That is, as notion income increases, the MPC decreases

Back 2

Absolute income hypothesis

Front 3

The ratio of the change in consumption spending to a given change in income

Back 3

Marginal propensity to consume (MPC)

Front 4

As national income increases, consumption spending increases as well, always by the same amount. That is, as national income increases, MPC remains constant

Back 4

Relative income hypothesis

Front 5

A person's consumption spending is related to his or her permanent income

Back 5

Permanent income hypothesis

Front 6

Typically, a person's MPC is relatively high during young adulthood, decreases during the middle-age years, and increases when the person is near or in retirement

Back 6

Life-cycle hypothesis

Front 7

Permanent income is the regular income a person expects to earn annually. It may differ by some unexpected gain or loss from the actual income earned

Back 7

Permanent income

Front 8

the unexpected gain or loss of income that a person experiences. It is the difference between a person's regular and actual income in any year.

Back 8

Transitory income

Front 9

Consumption spending that is independent of the level of income

Back 9

Autonomous consumption

Front 10

That part of national income not spent on consumption

Back 10

Saving

Front 11

The change in saving induced by a change in income

Back 11

Marginal propensity to save (MPS)

Front 12

A line, drawn at a 45 degree angle, showing all points at which the distance to the horizontal axis equals the distance to the vertical axis

Back 12

Income curve or 45 degree line

Front 13

investment spending that producers intend to undertake

Back 13

Intended investment

Front 14

investment that is independent of the level of income

Back 14

Autonomous investment