CH. 6 - Aggregate Expenditures

Question 1

Autonomous Spending (Expenditures)

Answer 1

The portion of total spending - independent of the level of income

Question 2

Balance of Trade

Answer 2

The value of a country’s exports of G + S ( - ) the value of imports

Question 3

Consumption Function

Answer 3

Relationship b/w Income + Consumption

Question 4

Dis-saving

Answer 4

Spending on consumption in excess of income

Question 5

Expenditure Equilibrium

Answer 5

Income at which values of production = aggregate expendtiures

Question 6

Induced Spending

Answer 6

The portion of spending that is dependent on level of income

Question 7

MLR - Marginal Leakage Rate

Answer 7

Change in leakages / change in income

MLR = (1 - MPE)
= MPS + MTR + MPM

Question 8

MPC - Marginal Propensity to Consume

Answer 8

Ratio - change of consumption / change in income

Question 9

MPE - Marginal Propensity to Expend

Answer 9

Ratio - change in expenditures / change in income

MPE = MPC - MPM

Question 10

MPM - Marginal Propensity to Import

Answer 10

Ratio - change in imports / change in income

Question 11

MPS - Marginal Propensity to Save

Answer 11

Ratio - change in savings / change in income

Question 12

MTR - Marginal Tax Rate

Answer 12

Ratio - change in taxation as a result of a change in income

Question 13

Saving Function

Answer 13

Relationship b/w income + saving

Question 14

Unplanned Investment

Answer 14

Difference b/w Production (Y) and Aggregate Expenditures (AE)

Question 15

Wealth Effect

Answer 15

The direct effect of a change in wealth on consumption spending

Question 16

Equation: Total Spending

Answer 16

Autonomous Spending + Induced Spending

Question 17

Equation: Multiplier

Answer 17

= 1 / MLR OR 1 / (1 - MPE)

Question 18

Equation: Total Taxes

Answer 18

= autonomous taxes + induced taxes

Question 19

Equation: Yd (disposable income)

Answer 19

= Y - T