KW_Macro_Glossary

KW_Macro_Glossary - Glossary absolute advantage: the...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Glossary absolute advantage: the advantage conferred by the ability to produce a good more efficiently—at lower cost of resources —than other producers. absolute value: the value of a number without regard to a plus or minus sign. accelerator principle: the proposi- tion that a higher rate of growth in real GDP leads to higher planned investment spending, because high growth in real GDP is indicative of high growth in sales, which encour- ages firms to invest. actual investment spending: the sum of planned investment spending and unplanned inventory investment . aggregate consumption function: an equation relating aggregate current disposable income and aggregate con- sumer spending for the economy as a whole. A common form for the aggre- gate consumption function is C = A + MPC × YD . aggregate demand curve: a graphi- cal representation of the relationship between the aggregate price level and the quantity of aggregate output demanded by households, businesses, the government, and the rest of the world. The aggregate demand curve has a negative slope due to the wealth effect of a change in the aggregate price level and the interest rate effect of a change in the aggregate price level . aggregate output: the economy’s total production of final goods and services for a given time period, usual- ly a year. Real GDP is the numerical measure of aggregate output typically used by economists. aggregate price level: the overall price level for final goods and services in the economy. aggregate production function: a hypothetical function that describes how productivity (real GDP per worker) depends on the quantities of physical capital per worker and human capital per worker as well as the state of technology. It has the gen- eral form Y/L = f(K/L, H/L, T) . aggregate spending: the sum of con- sumer spending, investment spending, government purchases, and exports minus imports. It is the total spending on domestically produced final goods and services in the economy. aggregate supply curve: a graphical representation of the relationship between the aggregate price level and the quantity of aggregate output supplied. appreciation: a rise in the value of one currency in terms of other currencies . AS–AD model: the basic model used to understand fluctuations in aggre- gate output and the aggregate price level. It uses the aggregate supply curve and the aggregate demand curve togeth- er to analyze the behavior of the econ- omy in response to shocks or government policy. autarky: occurs when a country can- not trade with other countries. automatic stabilizers: government spending and taxation rules that cause fiscal policy to be expansionary when the economy contracts and contrac- tionary when the economy expands. Taxes that depend on disposable
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 10

KW_Macro_Glossary - Glossary absolute advantage: the...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online