Unit 3 Terms Flashcards
Wealth
The value of a household’s accumulated savings
Inventory Investment
The value of the change in inventories held in the economy during a given period
Aggregate Demand Curve
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.
The Real Wealth Effect
The change in consumer spending caused by the altered purchasing power of consumers’ assets
The Interest Effect
The change in investment and consumer spending caused by altered interest rates that result from changes n the demand for money.
The Exchange Rate Effect
The change in net exports caused by a change in the value of the domestic currency, which leads to a change in the relative price of domestic and foreign goods and services
Marginal Propensity to Consume
The increase in consumer spending when disposable income rises by $1.
Marginal Propensity to Save
The increase in household savings when disposable income rises by $1.
Expenditure Multiplier
The ratio of total change in RGDP caused by an autonomous change in aggregate spending to the size of that autonomous change; indicates the total rise in RGDP that results from each $1 of an initial rise in spending.
Nominal Wage
The dollar amount of the wage paid.
Tax Multiplier
The factor by which a change in tax collections changes real GDP.
Aggregate Supply Curve
Shows the relationship between the aggreagate price level and the quantity of aggregate output supplied in the economy.
Sticky Wages
Nominal wages that are slow to fall even in the faee of high unemployment and slow to rise even in the face of labor shortages.
Short-Run Aggregate Supply Curve
Shows the positive 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.
Commodity Prices
