Chp11 The Income Expenditure Model

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7 Terms

1
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Planned expenditures

is another term for total demand for goods and services

2
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Equilibrium output

the level of GDP at which planned expenditure equals the amount that is produced.

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Two factors that can cause autonomous consumption to change

1 Increases in consumer wealth

2 Increase in consumer confidence 

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savings function 

the relationship between the level of saving and the level of income 

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Multiplier

= 1/1-mpc also for government spending

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Tax multiplier

-MCP / 1-mpc

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Marginal propensity to import 

The fraction of additional  income  that is spent on imports