Chapter 28: The Aggregate Expenditures Model

Leakage

Leakage

________- Withdrawal of spending from the economys circular flow of income and expenditures.

Injection

________- Addition of spending into the income- expenditures stream.

total output

Saving is what causes consumption to be less than ________ or GDP.

equilibrium GDP

The ________ will change in response to changes in either the investment schedule or the consumption schedule.

Lump

________- sum tax- A tax of a constant amount or, more precisely, a tax yielding the same amount of tax revenue at each level of GDP.

Recessionary expenditure

________ gap- The amount by which aggregate expenditures at the full- employment GDP fall short of those required to achieve the full employment GDP.

Exports

________ create domestic production, income, and employment for a nation.

aggregate expenditures

Increases in public spending, like increases in private spending, shift the ________ schedule upward and produce a higher equilibrium GDP.

possible output

Aggregate expenditures schedule- Shows the amount that will be spent at each ________ or income level.

Planned investment

An investment schedule showing the amounts business firms collectively intend to invest at each possible level of GDP

Investment schedule

Shows the amount of investment forthcoming at each level of GDP

Aggregate expenditures schedule

Shows the amount that will be spent at each possible output or income level

Equilibrium GDP

That output whose production creates total spending just sufficient to purchase that output

Leakage

Withdrawal of spending from the economys circular flow of income and expenditures

Injection

Addition of spending into the income-expenditures stream

Lump-sum tax

A tax of a constant amount or, more precisely, a tax yielding the same amount of tax revenue at each level of GDP

Recessionary expenditure gap

The amount by which aggregate expenditures at the full-employment GDP fall short of those required to achieve the full employment GDP

Inflationary expenditure gap

The amount by which an economys aggregate expenditures at the full-employment GDP exceed those just necessary to achieve the full-employment level of GDP

Planned investment

An investment schedule showing the amounts business firms collectively intend to invest at each possible level of GDP

Investment schedule

Shows the amount of investment forthcoming at each level of GDP

Aggregate expenditures schedule

Shows the amount that will be spent at each possible output or income level

Equilibrium GDP

That output whose production creates total spending just sufficient to purchase that output

Leakage

Withdrawal of spending from the economy’s circular flow of income and expenditures

Injection

Addition of spending into the income-expenditures stream

Net exports

Exports - imports

Lump-sum tax

A tax of a constant amount or, more precisely, a tax yielding the same amount of tax revenue at each level of GDP

Recessionary expenditure gap

The amount by which aggregate expenditures at the full-employment GDP fall short of those required to achieve the full employment GDP

Inflationary expenditure gap

The amount by which an economy’s aggregate expenditures at the full-employment GDP exceed those just necessary to achieve the full-employment level of GDP