Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
28 Cards in this Set
- Front
- Back
|
Aggregate Expenditure |
-Total amount that all economic agents want or plan to spend on domestic goods and services. |
|
|
Disaggregation |
_____ is similar to accounts for the expenditure side of national income accounting |
|
|
Aggregate Expenditure.... Actual output |
Discrepancies between ___ and ___ cause unintended cahnge on the inventory stocks of firms. |
|
|
AE < Y |
People want to buy less than what has been produced |
|
|
Adjust production |
Discrepancies between AE & Y serve as signal for firms to ____ |
|
|
AE > Y |
Firms will raise the production in order to prevent stock of inventories from falling below desired level and vice versa |
|
|
If AE = Y |
Unintended changes in inventories are equal to zero. No reason to adjust production and the economy is in equilibrium. |
|
|
Income & aggregate Expenditure |
Equilibrium requires equality between ____ and ____. |
|
|
Consumption |
____ is the act of using goods and services to satisfy human wants |
|
|
Autonomous consumption spending |
Represents that part of consumption spending that does not depend on income. |
|
|
Determinants of level of spending |
-age -profile of population -size of family -cost of living -political instability -peace and order situation |
|
|
MPC |
It is the slope of consumption function. It measures the influence of income on the level of consumption spending. |
|
|
-To accumulate wealth -To defer consumption spending from the present to the future. |
Why do household save? |
|
|
MPS |
Indicates the change in savings for a one peso change in income. |
|
|
AE |
=C+I+Y |
|
|
45°line |
Is a locus of points wherein Y is equal to AE. |
|
|
EQUILIBRIUM INCOME ASSUMPTION: two sector economy |
-Investment is fixed -no government; no taxes -close economy |
|
|
AGGREGATE ECONOMY |
The sum of autonomous consumption and investment when income is zero. |
|
|
AE |
=C+I=Y |
|
|
Y |
=C+S |
|
|
S |
=Y-C |
|
|
Equilibrium |
______ requires equality between AE and Y. AE=C+I=Y |
|
|
I, AE, Y |
At equilibrium, S=__ why? ___ = C + I = __ ; I=AE - C |
|
|
Produce more |
Increase in AE causes frims to ___ ___, causing output to also increase. |
|
|
Multiplier |
An effect in economics in which an increase in spending produces an increase in national income and consumption greater than the initial amount spent. |
|
|
Multiplier |
It is the number of times a rise in national income exceeds the rise in injections of demand that caused it. |
|
|
Multiplier |
Measure the change in equilibrium income as a result of a one peso change in the sum of autonomous components of AE. |
|
|
Multiplier |
K1= 1/1-mpc or 1/mps |
