Module 16-18

Question 1

The increase in consumer spending when disposable income rises by $1

Answer 1

Marginal propensity to consume (MPC)

Question 2

The increase in household savings when disposable income rises by $1

Answer 2

Marginal propensity to save (MPS)

Question 3

An initial rise or fall in aggregate spending that is the cause, not the result, of series of income and spending changes

Answer 3

Autonomous Changes in Aggregate Spending

Question 4

The ration of the total change in real GDP caused by an autonomous change in aggregate spending to the size of that autonomous change. It indicates the total rise in real GDP that results from each $1 of an initial rise in spending.

Answer 4

Spending multiplier

Question 5

Shows how a household’s consumer spending varies with the household’s disposable income

Answer 5

Consumption function

Question 6

The amount of money a household would spend if it had no disposable income

Answer 6

Autonomous Consumer Spending

Question 7

The relationship for the economy as a whole between aggregate current disposable income and aggregate consumer spending

Answer 7

Aggregate consumption function

Question 8

Is the investment spending that businesses intend to undertake during a given period

Answer 8

Planned investment spending

Question 9

Value of the change in total inventories held in the economy during a given period

Answer 9

Inventory investment

Question 10

(Positive) Occurs when actual sales are lower than businesses expected, leading to unplanned increases in inventories. Sales in excess of expectations result in negative unplanned inventory investment

Answer 10

Unplanned inventory investment

Question 11

The sum of planned investment spending and unplanned inventory investment

Answer 11

Actual investment spending

Question 12

Shows the relationship between the aggregate price level and the quantity of aggregate output demanded by households, businesses, the government, and the rest of the world

Answer 12

Aggregate demand curve

Question 13

The change in consumer spending caused by the altered purchasing power of consumers’ assets

Answer 13

Wealth effect of change in the aggregate price level

Question 14

The change in investment and consumer spending caused by altered interest rates that result from changes in the demand for money

Answer 14

Interest rate effect of a change in the aggregate price level

Question 15

The use of government purchases of goods and services, government transfers, or tax policy to stabilize the economy

Answer 15

Fiscal policy

Question 16

the central bank’s use of changes in the quantity of money or the interest rate to stabilize the economy

Answer 16

Monetary policy

Question 17

Shows the relationship between the aggregate price level and the quantity of aggregate output supplied in the economy

Answer 17

Aggregate supply curve

Question 18

Dollar amount of the wage paid

Answer 18

Nominal wage

Question 19

Nominal wages that are slow to fall even in the face of high unemployment and slow to rise even in the face of labor shortages

Answer 19

Sticky wages

Question 20

Shows the relationship between the aggregate price level and the quantity of aggregate output supplied that exists in the short run, the time period when many production costs can be taken as fixed

Answer 20

Short-run Aggregate supply curve

Question 21

Shows the relationship between the aggregate price level and the quantity of aggregate output supplied that would exist if all prices, including nominal wages were fully flexible

Answer 21

Long-run Aggregate Supply Curve

Question 22

Level of real GDP the economy would produce if all prices, including nominal wages, were fully flexible

Answer 22

Potential GDP