Chapter 8 Flashcards
Who was John Maynard Keynes?
British economist whose influential work offered and explanation of the Great Depression and suggested, as a cure, that the government should play and active role in the economy
what are classical economist?
a group of economists whose theory dominated economic thinking from the 1770s to the Great Depression. They believed recessions would naturally cure themselves because the price system would automatically restore full employment.
What is Say’s Law?
the theory that supply creates its own demand
The ___________ economist believed that a continuing depression is impossible because markets eliminate shortages or surpluses
classical
in the classical view, unemployment is the result of a short-lived adjustment period in which wages and prices decline or people voluntarily choose not to work. This shows that……
there is a tendency for the economy to restore full employment over time
what is a consumption function?
the graph or table that shows the amount households spend for goods and services at different levels of disposable income
what is dissaving?
the amount by which personal consumption expenditures exceed disposable income
what is autonomous consumption?
consumption that is independent of the level of disposable income
what is saving?
the part of disposable income households do not spend for consumer goods and services
what is marginal propensity to consume (MPC)?
the change in consumption resulting from a given change in real disposable income
what is the equation for MPC?
MPC = change in consumption / change in real disposable income
aka ^C/^Yd
what is marginal propensity to save(MPS)?
the change in saving resulting from a given change in real disposable income
aka ^S/^Yd
what equation expresses the points along the consumption function?
C = a + bYd
what is the sole cause of a movement along the consumption function?
a change in real disposable income
what is the cause of a shift or relocation in the consumption schedule?
when a factor other than real disposable income changes
