U3 P2 Cram

• Consumers spending a certain amount no matter what is called autonomous consumption

  • usually to pay necessities

• Consumer spending is made up of autonomous spending and disposable income (income after taxes)

  • if incomes are less than autonomous spending then there is dissaving

• How does the government stabilize the economy?

  • Fiscal Policy

    • actions by congress to stabilize the economy

  • Monetary Policy Actions

    • by the federal reserve bank to stabilize the economy

Discretionary vs Non-Discretionary

• Discretionary Fiscal Policy

  • Congress creates a bill designed to change aggregate demand through government spending/taxation