business cycle
an interval of expansion and contraction in the economy
consumer spending
the total individual and household purchases of consumer goods and services
consumption
the purchase of goods and services by households
consumption function
the relationship between consumption and disposable income
deficit spending
a situation in which expenditures are greater than revenues
disposable income
income remaining after deduction of taxes and other mandatory expenses and addition of government transfers, which households can spend or save
gross domestic product (GDP)
measurement of a country's total economic output
marginal propensity to consume (MPC)
the change in consumer spending that occurs in response to an incremental change in disposable income
marginal propensity to save (MPS)
the change in consumer savings that occurs in response to an incremental change in disposable income
real gross domestic product (real GDP)
the total output of the economy adjusted for inflation
Say's law
an economic law that states when an individual produces a product or service, they get paid for that work, and are then able to use that income to demand other goods and services
spending multiplier
the factor by which gains in total output are greater than the change in spending that caused it
stimulus
use of expansionary fiscal or monetary policy to jumpstart a sluggish or depressed economy or kickstart economic growth
tax multiplier
the effect on the economy from changes in tax policy
unplanned inventory accumulation
an excess of unsold goods caused by an unplanned event
unplanned negative inventory
a shortage of stored materials or goods caused by increased demand