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