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12 Cards in this Set
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- Back
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45 degree line
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a line along which the value of GDP is equal to the value of aggregate expenditures
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consumption schedule
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a schedule showing the amounts households plan to spend for consumer goods at different levels of disposable income
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saving schedule
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a schedule that shows the amounts households plan to save (plans not to spend for consumer goods), at different levels of disposable income
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break-even income
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the income level at which households plan to consume their entire incomes
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marginal propensity to consume (MPC)
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the fraction of any change in disposable income spent for consumer goods; equal to the change in consumption divided by the change in disposable income
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marginal propensity to save (MPS)
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the fraction of any change in disposable income that households save; equal to the change in saving divided by the change in disposable income
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wealth effect
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anything that has value because it produces income or could produce income. wealth i a stock; income is a flow. Assets less liabilities; net worth.
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expected rate of return
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the increase in profit a firm anticipates when it will obtain y purchasing capital (or engaging in research and development)
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investment demand curve
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shows the amount of investment forthcoming at each real interest rate
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multiplier
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the ratio of a change in GDP to the initial change in spending
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average propensity to consume (APC)
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fraction (or percentage) of disposable income that households plan to spend for consumer goods and services; consumption divided by disposable income
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average propensity to save (APS)
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fraction (or percentage) of disposable income that households save; saving divided by disposable income
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