Module 4 Flashcards
Macroeconomic equilibrium
What is produced equalswhat is purchased
3 measures of economic performance
Output: GDP, GNP,
•Unemployment: NRU,
•Inflation: CPI, IPD
MPC( marginal propensity to consume)
slope of theconsumption function
MPS(marginal propensity to save)
slope of the saving function
Spending in the economycomes from only 2 groups:
Consumption + Investment
Total Expenditures formula =
= C+I
Multiplier
shows the effect on equilibrium production from an exogenouschange in spending
Fiscal policy
Government policiesinvolving taxation andspending
2 kinds of taxes
- Lump Sum Taxes
2. Proportional Taxes
Lump sum tax
A tax which collects thesame dollar amount of revenue at all income levels.
Proportional tax
A tax which collects the sameproportionof income asrevenue at all income levels
Marginal tax rate system
A tax system where tax rates changeat different income levels
Progressive Marginal Tax System:
tax rate increases at higher levels of income
Regressive Marginal Tax System
:tax rate decreases at higher levels of income
NET EXPORTS FORMULA
Net Exports = Exports - Imports
exports determined by
- Foreign Income levels
* relative price of domestic goods
imports determined by
Domestic Income levels
•relative price of domestic goods
exchange rate
The amount of one currencyyou need to give up to get oneunit of a different currency
Output
Gross Domestic Productwhich is calculated bylooking at spending byC, I, G, and NX
expansionary fiscal policies
Government policies designedto cause the economy to expand
Contractual fiscal policies
Government policies designedto cause the economy to contract
