Chapter 10

Question 0

Induced investment

Answer 0

Investment that varies with the level of income

Question 1

Paradox of thrift / Paradox of saving

Answer 1

The apparent contradiction in the fact that an increase in intended aggregate saving results in a decrease in actual saving

Question 2

Multiplier effect

Answer 2

The ultimate change in the equilibrium income is greater than the change in spending that caused it

Question 3

Multiplier

Answer 3

The number by which a change in spending is multiplied to arrive at the change in income

Question 4

Marginal propensity to withdraw

Answer 4

The fraction of extra income allocated to saving, taxes and imports

Question 5

Generalize multiplier

Answer 5

The multiplier that results from considering all withdrawals; the reciprocal of marginal propensity to withdraw

Question 6

Inflationary gap

Answer 6

The amount by which desired aggregate expenditure exceeds aggregate output at full employment

Question 7

Output gap

Answer 7

The difference between the potential output and the actual output of an economy

Question 8

Income gap

Answer 8

The difference between equilibrium level of income and the full-employment level of income

Question 9

Deflationary gap / Recessionary gap

Answer 9

The amount by which aggregate expenditure falls short of aggregate output at full employment