Chapter 13.4 Flashcards
1
Q
Keynesian multiplier
A
The change in real GDP divided by the initial change in expenditure
2
Q
Marginal propensity to consume
A
The fraction of additional income that households spend on consumption of domestically produced goods and services
3
Q
Marginal propensity to save
A
The fraction of additional income that households save
4
Q
Marginal propensity to tax
A
The fraction of additional income that is taxed
5
Q
Marginal propensity to import
A
The fraction of additional income that is spent on imported goods and services
6
Q
What is the value of the keynesian multiplier given by?
A
1/(1 - MPC)
7
Q
What is an alternate formula to get the keynesian multiplier?
A
1/(MPS + MPT + MPM)
8
Q
When using the multiplier effect to calculate real GDP, what is being assumed?
A
That the price level is constant
