Chapter 23

Question 1

Aggregate expenditure (AE)

Answer 1

The sum of spending by households, business firms, the government, and foreigners on final goods and services produces in the United States

Question 2

Automatic destabilizers

Answer 2

A feature of the economy that increases the size of the expenditure multiplier and enlarges the impact of spending changes on real GDP

Question 3

Automatic Stabilizer

Answer 3

A feature of the economy that reduces the size of the expenditure multiplier and diminishes the impact of spending changes on real GDP

Question 4

Autonomous Consumption Spending

Answer 4

The part of consumption spending that is independent of income, also the vertical intercept of the consumption function

Question 5

Consumption Function

Answer 5

A positively sloped relationship between real consumption spending and real disposable income

Question 6

Consumption-income line

Answer 6

A line showing aggregate consumption spending at each level of income or GDP

Question 7

Equilibrium GDP

Answer 7

In the short run, the level of output at which output and aggregate expenditure are equal

Question 8

Expenditure multiplier

Answer 8

The amount by which equilibrium real GDP changes as a result of a one dollar change in autonomous consumption, investment spending, government purchases, or net exports

Question 9

Marginal Propensity to consume

Answer 9

The amount by which consumption spending rises when disposable income rises by one dollar

Question 10

Short Run Macro Model

Answer 10

A macroeconomic model that explains how changes in spending can affect real GDP in the short run