Macro Economics Chapter 08 Key Words

Question 1

autonomous consumption

Answer 1

Consumption that is independent of the level of disposable income.

Question 2

aggregate expenditures function (AE)

Answer 2

The function that represents total spending in an economy at a given level of real disposable income.

Question 3

autonomous expenditure

Answer 3

Spending that does not vary with the current level of disposable income.

Question 4

classical economists

Answer 4

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.

Question 5

consumption function

Answer 5

The graph or table that shows the amount households spend for goods and services at different levels of disposable income.

Question 6

dissaving

Answer 6

The amount by which personal consumption expenditures exceed disposable income.

Question 7

investment demand curve

Answer 7

The curve that shows the amount businesses spend for investment goods at different possible rates of interest.

Question 8

John Maynard Keynes

Answer 8

British economist (1883–1946) whose influential work offered an explanation of the Great Depression and suggested, as a cure, that the government should play an active role in the economy.

Question 9

marginal propensity to consume (MPC)

Answer 9

The change in consumption resulting from a given change in real disposable income.

Question 10

marginal propensity to save (MPS)

Answer 10

The change in saving resulting from a given change in real disposable income.

Question 11

saving

Answer 11

The part of disposable income households do not spend for consumer goods and services.

Question 12

Say’s Law

Answer 12

The theory that supply creates its own demand.