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unit3 vocab ap macro
ap macroeconomics
| Question | Answer |
|---|---|
| average propensity to consume (APC) | fraction (or percentage) of disposable income that households plan to spend for consumer goods and services; consumption divided by disposable income |
| average propensity to save (APS) | fraction (or percentage) of disposable income that households save; saving divided by disposable income |
| marginal propensity to consume (MPC) | the fraction of any change in disposable income spent for consumer goods; equal to the change in consumption divided by the change in disposable income |
| marginal propensity to save (MPS) | the fraction of any change in disposable income that households save; equal to the change in saving divided by the change in disposable income |
| Multiplier effect | the effect on equilibrium GDP of a change in aggregate expenditures or aggregate demand (caused by a change in the consumption schedule, investment, government expenditures, or net exports) |
| Inflationary Gap | the amount by which the aggregate expenditures schedule must shift downward to decrease the nominal GDP to its full-employment noninflationary level |
| Aggregate Demand (AD) | a schedule or curve that shows the total quantity of goods and services demanded (purchased) at different price levels |
| Determinants of AD | factors such as consumption spending, investment, government spending, and net exports that, if they change, shift the AD curve |
| Aggregate Supply (AS) | a schedule or curve showing the total amount spent for final goods and services at different levels of real GDP |
| Determinants of AS | factors such as input prices, productivity, and the legal-institutional environment that if they change, shift the AS curve |
| Expansionary Fiscal Policy | an increase in government purchases of goods and services, a decrease in net taxes, or some combination of the two for the purpose of increasing AD and expanding real output |
| Contractionary Fiscal Policy | a decrease in government purchases for goods and services, an increase in net taxes, or some combination of the two, for the purpose of the decreasing AD and thus controlling inflation |
| Crowding-out Effect | a rise in interest rates and a resulting decrease in planned investment caused by the Federal government's increased borrowing in the money market |
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