Vocabulary Terms

Actual investment spending

AD-AS model

The model of the economy that includes aggregate versions of purchasing and producing

Aggregate consumption function

A model of the relationship between aggregate consumer spending and aggregate disposable income

Aggregate demand curve

The negative relationship between price level and quantity of real gdp demanded (expended on) by consumers, businesses, governments and foreigners

Aggregate supply curve

Relationship between price level and aggregate quantities of real GDP produced in an economy

Automatic stabilizers

Autonomous change in aggregate spending

Autonomous consumer spending

Balanced budget multiplier

Consumption function

Contractionary fiscal policy

Demand shock

Discretionary fiscal policy

Expansionary fiscal policy

Fiscal policy

Inflationary gap

Interest rate effect of a change in the aggregate price level

Inventory investment

Long-run aggregate supply curve

Long-run macroeconomic equilibrium

Lump-sum taxes

Marginal Propensity to Consume (MPC)

Marginal Propensity to Save (MPS)

Monetary policy

Nominal wage

Output gap

Planned investment spending

Potential output

Recessionary gap

Self-correcting

Short-run aggregate supply curve

Short-run equilibrium aggregate output

Short-run equilibrium aggregate price level

Short-run macroeconomic equilibrium

Social insurance

Spending multiplier

Stabilization policy

Stagflation

Sticky wages

Supply shock

Tax multiplier

Unplanned inventory investment

Wealth effect of a change in the aggregate price level

National Income and Price Determination

Terms