ADAS Flashcards
AD
total DD for all the g/s, produced for a given general price level
AD= C + I + G + (X-M)
Consumption
Spending by households or consumer g/s (non-durable/ durable)
Induced: expenditure affected by the level of Y
Autonomous: expenditure affected by factors other than Y
Investments
Expenditure on capital goods such as equipments, plants as well as additions to stocks of raw materials and intermediate goods
Real i/r
Adjusted to remove the effects of inflation.
Govt. expenditure
Amount of spending by government on goods and services
Export revenue (X)
Refers to revenue from sales of goods and services to foreign countries
Import expenditure (M)
Refers to expenditure incurred due to purchases of goods & services from foreign countries
AS
Total output that firms in the economy are willing and able to supply at different price levels in a given period of time.
Marginal propensity to consume (MPC)
Measures the extent of change in consumption due to change in national income
Marginal propensity to save (MPS)
Measures the change in savings due to a change in national income
Marginal propensity to tax (MPT)
Measures the change in tax revenue collected due to a change in national income.
Example sentence: If MPT is 0.2, it means that for every $1 increase in national income, tax revenue increases by $0.20.
Marginal propensity to import (MPM)
Measures the change in import expenditure due to a change in national income.
Example sentence: If MPM is 0.3, it means that for every $1 increase in national income, import expenditure increases by $0.30.
Marginal propensity to withdraw (MPW)
Measures the change in all withdrawals in an economy due to a change in income [MPW = MPS + MPT + MPM].
MPW = Marginal propensity to save (MPS) + Marginal propensity to tax (MPT) + Marginal propensity to import (MPM)
