Quiz 4 Flashcards
Positively or directly related data is when…
Positively or directly related data is when the independent and dependent variables move together (upward or downward). The sign on the slope will be positive
The Ceteris Paribus Assumption means…
The Ceteris Paribus Assumption means when all other variables not specified in the model are assumed to not affect the dependent variable in a constant manner.
What is the meaning of the constant?
The constant is the value of the dependent variable when the independent variable is not considered, or =0.
What is the meaning of the slope?
The slope is the amount and direction of change in the dependent variable every time there is a one unit increases in the independent variable.
Where is the dependent variable located on a diagram?
The dependent variable is located on the vertical axis of a diagram.
What does the Aggregate Expenditure Model (AE) represent?
The Aggregate Expenditure Model represents a forecast of spending.
In the Aggregate Expenditure Model, constants are referred to as:
Constants are referred to as autonomous.
In the Aggregate Expenditure Model, slopes are referred to as:
Marginal Propensities (MP)
What is the Consumption/Savings model?
Consumption + Savings = Income
Disposable Income (Yd) is:
Disposable Income is income minus taxes
What is the equation to calculate Real interest rates (r)?
r = i - p,
where i = nominal interest rate & p = inflation rate
Lump Sum taxes are:
Lump Sum taxes are sales taxes (GST & PST)
What is the equation for Aggregate Expenditure?
AE = C + I + G - T + X - M
As Aggregate Expenditure becomes steeper, it means the economy is:
Steepening means that the economy is expanding. People are spending more, so businesses are producing more.
