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Macrochapter 3 vocab
Terms in this set (34)
Factors of production
an input used to produce goods and services, like capital and labor
The mathematical relationship showing how the quantities of the factors of production determine the quantity of goods and services produced Y=f(K,L)
Constant returns to scale
A property of production function whereby a proportionate increase in all factors of production leads to an increase in output of the same production
The amount paid for one unit of the factor of production
A situation in which there are many individuals or firms so that the the actions of anyone of them do not influence market prices
The income of firm owners; firm revenue minus firm cost
Marginal Product of Labor
The amount of extra output produced when the labor inputs is increased by one unit
Diminishing Marginal Product
A charactersitic of productions function whereby the marginal product of a factor fall as the amount of the factor increases while other factors are held constant
Marginal Product of Captial (MPK)
The amount of extra output produced when the capital input is increased by one unit
Real rental price of capital
The amount paid to rent one unit of capital
Economic profit vs accounting profit
Cobb-Douglass production function
Income remaining after the payment of taxes
A relationship showing he deteminants of consumption for example the relationshio between consumption and disposable income C = C (Y-T)
Marginal Propensity to Consume
The increase in consumption resulting resulting from a one dollar increase in disposable income
The market price at which resources are transferred between the present and the future; the return to saving and the cost of borrowing
Nominal interest rate
The return to savings and the cost of borrowing with out adjustment for inflation
real interest rate
The return to savings and the cost of borrowing after adjustment for inflation
A nation's income minus consumption and government purchases, the sum of private and public savings
government recipts minus government spending minus government spending
The flow of resiyrces available to finance capital accumulation
The reduction in investment that results when expansionary fiscal policy raises current interest rate
chooses the quantity of labor to employ, price of output multiplied by the marginal product of labor equals wage
At any particular point in time, the output of the economy:
is fixed because the supplies of capital and labor and the technology are fixed.
Crowding out occurs when an increase in government spending ______ the interest rate and investment ______.
In a Cobb-Douglas production function the marginal product of capital will increase if:
the quantity of labor increases.
n a classical model with fixed factors of production and flexible prices, the amount of consumption spending depends on _____ , the amount of investment spending depends on _____, and the amount of government spending is determined _____.
disposable income; the interest rate; exogenously
In equilibrium, total investment equals:
In the circular flow diagram, firms receive revenue from the _____ market, which is used to purchase inputs in the _____ market.
The real rental price of capital is the price per unit of capital measured in:
units of output.
The supply and demand for loanable funds determines the:
real interest rate.
The supply of loanable funds is equivalent to: