Macro Economics test 2

MPC +MPS=

1

Labor Force participation rate

(employed + unemployed)/ Sum of all 3

Inflation rate

(this year's base year- last years base year) /last years base year

Nominal GDP

(units * year price) + (units * year price)+ (units * year price)

Saving Equals

Disposable income - consumption expense

In The keynesian model of aggregate expenditure, real GDP is determined by

Level of aggregate demand

When real gross domestic product (GDP) exceeds total planned real expenditures

Lower level of equilibrium (GPD) will result

The multiplier effect

Magnifies small changes in spending into larger changes in real GDP

Base year =

Nominal GDP for year/ base year's nominal GDP

The marginal propensity to consume (MPC)

Shows the % of real disposable income consumed at each level of income

Unemployment rate =

Unemployed / (employed + unemployed)

A consumption function shows

a positive (direct) relationship between consumption expenditure and disposable income

economists define investment as the purchase of

any new physical asset such as a new machine or new house

keynes believed that the economy could attain a level of equilibrium level of output

below the full employment level of output

Keynes argued that the sum of the components that comprise aggregate demand

could add up to an output greater than the economy is capable of producing, resulting in less than full employment

When someone quits their job to look for a better one they are

frictionally unemployed

What is not an investment

government bonds

a tax but usually

increases consumption expenditure by an amount that is less than the value of the tax cut

the sum of frictional and structural employments is thought as

natural rate of unemployment

Inflation is an increase in

overall price level

an increase in interest will cause

planned investment spending to decrease

The Keynesian theory is based on a hypothesis that

saving and consumption are influenced primarily by real current disposable income

when someone loosed their job because the the company relocated the plant to another country

structural unemployment

The Marginal Propensity to consume is

the change in consumption expenditure / change in disposable income

if aggregate demand equals output

the economy is at an equilibrium

if business executives become more optimistic about the future we would expect that

the investment curve would shift outward to the right

1- MPC Equals

the marginal propensity to save

Fiscal policy refers to

the spending and taxing policies used by the government to influence the economy.

The Keynesian model, whenever planned investment is less than planned saving

there will be an unplanned inventory decrease and real GDP will eventually increase

the second bank of the united states was denied a new charter by

Andrew Jackson

The increase in the amount that the government collects in taxes when the economy expands and decreases in the amount that the government collects in taxes when the economy goes into a recession is an example of

Automatic stabilizers