Econ 201 - Lecture 13: Output and Expenditure in the Short Run

A series of flashcards covering key concepts and vocabulary related to output and expenditure in the short run based on lecture notes.

Aggregate expenditure model

A macroeconomic model that focuses on the short-run relationship between total spending and real GDP, with a constant price level.

Aggregate Expenditure (AE)

The total spending in the economy, including consumption (C), planned investment (I), government purchases (G), and net exports (NX).

Inventories

Goods that have been produced but not yet sold.

Macroeconomic Equilibrium

Occurs when aggregate expenditure equals GDP, resulting in unchanged inventories.

Consumption function

The relationship between consumption spending and disposable income.

Marginal propensity to consume (MPC)

The slope of the consumption function, reflecting the change in consumption spending when disposable income changes.

Disposable income

The income remaining after households have paid personal income tax and received government transfers.

Household Wealth

The value of a household's assets minus its liabilities.

Interest Rate

The nominal interest rate adjusted for inflation, influencing consumption spending.

Marginal propensity to save (MPS)

The change in saving divided by the change in disposable income.