Campbell R. McConnell,
University of Nebraska, Lincoln
Stanley L. Brue,
Pacific Lutheran University
Thomas P. Barbiero,
Ryerson University
| 45-degree line | A line along which the value of GDP (measured horizontally) is equal to the value of aggregate expenditures (measured vertically).
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| Actual investment | The amount that firms do invest; equal to planned investment plus unplanned investment.
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| Aggregate expenditures schedule | A schedule or curve that shows the total amount spent for final goods and services at different levels of GDP.
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| Average propensity to consume | Fraction (or percentage) of disposable income that households plan to spend for consumer goods and services; consumption divided by disposable income.
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| Average propensity to save | Fraction (or percentage) of disposable income that households save; saving divided by disposable income.
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| Balanced-budget multiplier | The extent to which an equal change in government spending and taxes changes equilibrium gross domestic product; always has a value of 1, since it is equal to the amount of the equal changes in G and T.
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| Break-even income | The level of disposable income at which households plan to consume (spend) all their income and to save none of it.
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| Consumption schedule | A schedule showing the amounts households plan to spend for consumer goods at different levels of disposable income.
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| Equilibrium GDP | The level at which the total quantity of goods produced (GDP) equals the total quantity of goods purchased.
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| Expected rate of return | The increase in profit a firm anticipates it will obtain by purchasing capital (or engaging in research and development), expressed as a percentage of the total cost of the investment (or R&D) activity.
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| Inflationary gap | The amount by which the equilibrium GDP exceeds full-employment GDP.
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| Injection | An addition of spending to the income-expenditure stream; investment, government purchases, and net exports.
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| Investment demand curve | A curve that shows the amount of investment demanded by an economy at a series of real interest rates.
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| Investment schedule | A curve or schedule that shows the amounts firms plan to invest at various possible values of real gross domestic product.
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| Leakage | (1) A withdrawal of potential spending from the income-expenditures stream via saving, tax payments, or imports. (2) A withdrawal that reduces the lending potential of the banking system.
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| Lump-sum tax | A tax that is a constant amount (the tax revenue of government is the same) at all levels of GDP.
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| Marginal propensity to consume | The fraction (or percentage) of any change in disposable income spent for consumer goods; equal to the change in consumption divided by the change in disposable income.
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| Marginal propensity to import | The fraction (or percentage) of any change in income (gross domestic product) spent for imported goods and services; equal to the change in imports divided by the change in income.
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| Marginal propensity to save | The fraction (or percentage) of any change in disposable income that households save; equal to the change in saving divided by the change in disposable income.
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| Multiplier | The ratio of a change in the equilibrium GDP to the change in investment or in any other component of aggregate expenditures or aggregate demand; the number by which a change in any component of aggregate expenditures or aggregate demand must be multiplied to find the resulting change in the equilibrium GDP.
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| Planned investment | The amount that firms plan or intend to invest.
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| Recessionary gap | The amount by which equilibrium GDP falls short of full-employment GDP.
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| Saving schedule | A schedule that shows the amounts households plan to save (plan not to spend for consumer goods), at different levels of disposable income.
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| Unplanned changes in inventories | Changes in inventories that firms did not anticipate; changes in inventories that occur because of unexpected increases or decreases of aggregated spending (of aggregate expenditures).
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| Wealth effect | The tendency for increases (decreases) in the price level to lower (raise) the real value (or purchasing power) of financial assets with fixed money values; and, as a result, to reduce (expand) total spending in the economy.
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2002 McGraw-Hill Higher Education