Economics

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W 358 PAffi;:iMacroeconomicAnalysis

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12.813 fi = 'tDh,sre

n_D0- Ct: ;-t,l -

wlt:

gross private domestic investmenL p.332

induced <onsumption enpenditures, p.332

injections, p.347 interest-related expenditure (lBE)

function, p.352 investment spending function, p. 340

leakages, p.347

marginal propensigr to consume (MPC),p,324

marginal propensity to save (/!lPS) , p.325

Multiplier, p.351

,r ;, ;r*," ,.. ".."",]

.,.'..-;.:.l';

net export expenditure, p.342

nominal interest rate, p. 327

nominal terms, p.323

personal consumption expenditure, p.324

potential GDB p.322

rea! i nterest rate, p. 327

real terms, p.323

relative prices, p.335

saving (5), p.325

unplanned inventory decrease, p.349

unplanned inventory increase,

P.349

Exercises

Tbehnical Questions

The real interest rate increases. Consumer confi dence decreases. Higher taxes are imposed on business profits. The economies of many countries in the rest of the world go into recessions.

.,. e*%q{ffi the following statements as to whether

a. The have a than changes confidence.

b. Both an increase government spending (G) and an increase taxes (7p) will shift the aggregate function in the same direction.

c. The nationr ts show that real lncome always equals expenditure (E), giu the dqfinition of the ci,rcular floro af econfimic a,cti,aitg. Thus, the economy must utwayb'be in equilibrium because that is also where I/= E

a.

b. C.

d.

af-\ ,--')-),-s -kahn, L4L @t zzti*-* u-, #3

Ca + Io+ Go + & - Mo + crY + irY - mrY

.E6*(c1 *\-m1)Y

lco+ Io + Go + xo- Mol marginal propenslty to consume marginal propensity to invest

marginal propensity to import

Key Terms

aggregate expenditure, p. 324

aggregate expenditure function, p. 345

autonomous consumption

expendltures, p.332

budget surplus/deficit, p. 341

capacity utilization rates (CUBsl, p. 337 Consumer Confidence lndex (CCD , p.327

Consurner Sentiment lndex (CSA, p. 327

consumptian function, P. 324

currency exchange rate, p.343

equilibrium level of income and outpuL p.347

fiscal pollcy, p.341

government expenditurg p. 341

the difference

fand which are no=tRQnlain your answer. the effect of the curreicy exchange rate

Economics for Managers, Third Edition, by Paul G. Farnham. Published by Prentice Hall. Copyright O 2014 by Pearson Education, lnc.

ing variables:

meals that changes in weall.h