Chapter 11 - The Income-Expenditure Model

Marginal Propensity

Marginal Propensity

________ to Consume (MPC): The fraction of additional income that is spent.

Policymakers

________ need to take into account the multipliers for government spending and taxes as they develop policies.

total demand

Planned Expenditures: Another term for ________ for goods and services.

equilibrium level of output

The ________ occurs where planned expenditures equal production.

income expenditure model

The ________ focuses on changes in the level of output or real GDP.

government spending

Economists call the multiplier for ________ and taxes the balanced- budget multiplier because equal changes in ________ and taxes will not unbalance the budget.

Equilibrium output

________ is determined at the level of income where savings equal investment.

Government programs

________ affect households disposable personal income- income that ultimately flows back to households after subtraction from their income of any taxes paid and after addition to their income of any transfer payments they receive, such as Social Security, unemployment insurance, or welfare.

automatic stabilizers

The ________ prevent consumption from falling as much in bad times and from rising as much in good times.

total planned expenditures

An increase in government spending will increase ________ for goods and services.

M

________= my, where m is a fraction known as marginal propensity to import.

Exports

________ affect GDP through their influence on how other countries demand goods and services produced in the United States.

Increases

________ in consumer wealth will cause a(n) ________ in autonomous consumption.

consumption function

The ________ is determined by the level of autonomous consumption and by the MPC.

Marginal propensity

________ to import: The fraction of additional income that is spent on imports.

Equilibrium output

________= (autonomous consumption + investment)/ (1- MPC) Saving and Investment.

marginal propensity

A change in the ________ to consume will cause a change in the slope of the consumption function.

Equilibrium output

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

Tax multiplier

_____________ = -MPC/(1-MPC)

Planned expenditures including government

___________________________ = C + I + G