5 - foundations of the macroeconomy

business cycles
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Terms in this set (21)
investment spendingbusiness spending on new goods, such as machinery, equipment, buildings, and inventories, non income determined spending does not come from household earned income fluctuates from year to year bc spending for businesses is very differentretained earningsthe portion of a business's accumulated profits that has been reatained for investment or other purposessaving borrowing relationshipthe relationship between the amont saved by households and businesses and the amount returned to the spending stream through business and household borrowinggovernment purchases of good and servicesgovernmnet spending on new goods and services; nonincome determined spendingexportsgoods and services that are sold abroadimportsgoods and services purchased from abroadnet exportsexports minus imports, is postitive when exports exceed imports and is negative when imports exceed exportsmultiplier effectthe change in total output and income generated by a change in non income determined spending is larger than , or a multiple of, the spending itself initial change in a nonincome determined spending percentage of addtional income not spend = total change in output and incomeexpectationsanticiptations of future; can affect current actions by households and businesses and the likelihood that the future events will occurfiscal policyinfluencing the levels of aggregate output and employment or prices through changes in federal government purchases, transfer payments, and or taxesmonetary policyinfluencing the levels of aggreagate output and employment or prices through changes in interest rates and the money supply