Ch.6 Aggregate Expenditures Flashcards
Autonomous / Induced
Which is/isn’t dependent on Income?
Autonomous = independent
Induced = Dependent
The Ratio of
∆ in Consumption
to
∆ in Income
MPC
Marginal Propensity to Consume
. ∆ Consumption
MPC = ————————
. ∆ Income
In the models of
1) Closed private economy
2) Complete Exp. Model
Relations btw MPC / MPS / MTR
∵ ?
1) Closed private economy
MPC+MPS = 1
∵ Y = C + S
MTR doesn’t exist ∵No Gov
2) Complete Exp. Model
MPC+MPS+MTR = 1
∵ Y = C + S + T
The Income @which
has Equal Value of
Production &
Aggr. Expenditures
Expenditure Equilibrium
Y = AE
Injections = Leakages
I+G+X=T+Im+S
nm
No Unplanned Investment
Unintended Investments
by firms to
Buildup or Rundown
Inventories
& formula
Unplanned Investment
= Y - AE
∆ Inventory when
Y > AE &
Y < AE
Y > AE ⇒ Inventory↑
Y < AE ⇒ Inventory↓
$1 Increase in
Autonomous Spending
leads to
more than $1 Increase
in Income & AE
& formula
Multiplier
. ∆ Income
Multiplier = ——————
. ∆Auto. Expenditures
. 1 1
= —— = ———
. MLR (1-MPE)
Relations btw
MPC
MPS
in closed private economy
MPC+MPS = 1
∵ Y = C + S
Relations btw
MPE
MLR
MPE+MLR = 1
∵ Y = Expenditure + Leakage
MPE & MLR
formulas
. ∆Aggr. Expenditure
MPE = —————————
. ∆ Income
. ∆ Leakage
MLR = ——————
. ∆ Income
Disposable Income
Yd = ?
Yd = Y - T
= C + S
Budget Balance
= ?
meanings of
>0 / =0 / <0
Budget Balance
= T - G
when
>0 ⇒Budget Surplus
=0 ⇒Balanced Budget
<0 ⇒Budget Deficit
Relations btw
MPE
MPC
MPM
MPE = MPC - MPM
∵ Consumption incl. Import
& GDP excl. Import
MP__ = ?
M__R = ?
Marginal Propensity to ___
Expend/ Consume/ Save/ iMport/
Marginal ___ Rate
Leakage/ Tax/