Chapter 20

Question 1

(Household) Saving

Answer 1

The portion of after-tax income that households do not spend on consumption

Question 2

Aggregate Production Function

Answer 2

The relationship showing how much total output can be produced with different quantities of labor, when quantities of all other resources and technology are held constant

Question 3

Budget Deficit

Answer 3

The excess of government purchases over net taxes

Question 4

Budget Surplus

Answer 4

The excess of net taxes over government purchases

Question 5

Business demand for funds curve

Answer 5

Indicates the level of investment spending firms plan at various interest rates

Question 6

Classical Model

Answer 6

A macroeconomic model that explains the long-run behavior of the economy

Question 7

Complete Crowding Out

Answer 7

A dollar-for-dollar decline in one sector’s spending caused by an increase in some other sector’s spending

Question 8

Crowding out

Answer 8

A decline in one sector’s spending caused by an increase in some other sector’s spending

Question 9

Demand-side effects

Answer 9

Macroeconomic policy effects on total output that work through changes in total spending

Question 10

Disposable Income

Answer 10

Household income minus net taxes, which is either spent or saved

Question 11

Fiscal Policy

Answer 11

A change in government purchases or net taxes designed to change total output

Question 12

Government Demand for Funds Curve

Answer 12

Indicates the amt. of government borrowing at various interest rates

Question 13

Injections

Answer 13

Spending on a country’s output from sources other than its households

Question 14

Labor Demand Curve

Answer 14

Indicates how many workers firms will want to hire at various real wage rates

Question 15

Labor Supply Curve

Answer 15

Indicates how many people will want to work at various real wage rates

Question 16

Leakages

Answer 16

Income earned by households that they do not spend on the country’s output during a given year

Question 17

Loanable Funds Market

Answer 17

The market in which savers make their funds available to borrowers

Question 18

Market Clearing

Answer 18

Adjustment of prices until quantities supplied and demanded are equal

Question 19

Net Taxes

Answer 19

Government tax revenues minus transfer payments

Question 20

Planned Investment Spending

Answer 20

Business purchases of plant and equipment

Question 21

Say’s Law

Answer 21

The idea that total spending will be sufficient to purchase the total output provided

Question 22

Supply of funds Curve

Answer 22

Indicates the level of household saving at various interest rates

Question 23

Total demand for funds curve

Answer 23

Indicates the total amount of borrowing at various interest rates