macro unit 4

Question 1

Marginal Propensity to Consume (MPC)

Answer 1

the increase in consumer spending when disposable income rises by $1

Question 2

Marginal Propensity to Save (MPS)

Answer 2

the increase in household savings when disposable income rises by $1

Question 3

spending multiplier

Answer 3

the ratio of the total change in real GDP caused by an autonomous change in aggregate spending. Indicates total rise in real GDP

Question 4

autonomous change in aggregate spending

Answer 4

initial rise or fall in aggregate spending that is the cause of a series of income and spending changes

Question 5

consumption function

Answer 5

shows how a household’s consumer spending varies with the household’s current disposable income

Question 6

autonomous consumer spending

Answer 6

amount of money a household would spend if it had no disposable income

Question 7

aggregate consumption function

Answer 7

the relationship between aggregate disposable income and aggregate consumer spending

Question 8

planned investment spending

Answer 8

the investment spending that businesses intend to undertake during a given period

Question 9

wealth effect of change in aggregate price level

Answer 9

the change in consumer spending caused by altered purchasing power of consumer’s assets

Question 10

interest rate effect of change in aggregate price level

Answer 10

the change in investment and consumer spending caused by altered interest rates that result from changes in the demand for money

Question 11

fiscal policy

Answer 11

the use of government purchases of goods and services, government transfers, and tax policy to stabilize the economy

Question 12

monetary policy

Answer 12

the central bank’s use of changes in the quantity of the money or interest rate to stabilize the economy

Question 13

nominal wage

Answer 13

the dollar amount of the wage paid

Question 14

sticky wages

Answer 14

nominal wages that are slow to fall even in the face of labor shortages