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13 terms

ch. 28

STUDY
PLAY
aggregate planned expenditure
equal to planned consumption expenditure plus planned investment plus planned government expenditure on goods and services plus planned exports minus planned imports
disposable income
aggregate income minus taxes plus transfer payments
consumption function
the relationship between consumption expenditure and disposable income other things remaining the same
saving function
the relationship between saving and disposable income other things remaining the same
marginal propensity to consume
the fraction of a change in disposable income that is consumed. the slope of the consumption function
marginal propensity to save
the fraction of change in disposable income that is saved. the slope of the saving function
marginal propensity to import
the fraction of an increase in real gdp that is spent on imports
induced expenditure
consumption expenditure minus imports varies with real gdp
autonomous expenditure
the sum of investment, governement expenditures, and exports do not vary with real gdp
equilibrium expenditure
the level of aggregate expenditure that occurs when aggregate planned expenditure equals real gdp
Multiplier
the amount by which a change in autonomous expenditure is magnified or multiplied to determine the change in equilibrium expenditure and real gdp
wealth effect
a rise in the price level decreases the purchasing power of consumers real weath which decreases their consumption expenditures
substitition effects
a rise in the price level makes purchasing today more expensive relative to the future