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29 Cards in this Set
- Front
- Back
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What is consumption directly related to?
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Disposable Income.
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What is savings relationship to disposable income?
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Savings is a smaller portion of a small disposable income than of a larger disposable income.
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What is national breakeven income.
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Income level which households plan to consume their entire incomes.
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when does dissavings occur and how it can happen?
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When we spend more then our disposable income. Either sell assets, or borrow money.
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APS/APC: MPS/MPC
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average perpensity to save/consume and Marginal perpensity to save/ consume
average means how much you will save and consume out of you original income margininal means how much you will save or consume from stuff like bonuses |
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What is disposable income. And what it is the basic determinate of?
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Personal income minus personal taxes. The amount households will consume and save.
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What is the effect of feeling of wealth on household spending/savings?
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increase spending and reduce their savings.
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What is the effect of real interest rates on households? (what they tend to do and not do.)
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When real interest rates fall, households tend to borrow more, consume more, and save less.
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What is the relationship between household debt and consumption and savings?
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When consumers increase household debt, there is a rise in consumption.
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What is Equilibrium GDP?
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Total quantity of goods produced = total quantity of goods purchased.
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What is a cause for consumption to be less than GDP?
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Savings leakage
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Under what circumstances would savings leakage not affect equilibrium GDP?
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Savings = Gross Investment
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Requirements for GDP equilibrium?
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no unplanned change in inventory
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Effect of unplanned changes in inventory?
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If inventory goes up the GDP goes down and the other way around.
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Taxation reduces... (list 3)
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disposable income, lowers consumption and savings, and reduces equilibrium GDP.
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Non income determinates of consumption and savings. (list 3 explain 1)
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Wealth (value of your assets), expectations, household debt.
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What are Expansionary and Contractionary fiscal policies designed to do?
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Expansion: heat up. Contractionary: cool down.
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What do Expansionary and Contractionary fiscal policies help prevent?
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Expansion- Recession Contractionary- Inflation
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What are examples of Expansionary and Contractionary policies?
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Expansionary- lower taxes and increase spending
Contractionary-increase taxes and lower spending |
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What are Expansionary and Contractionary fiscal policies effect on the national budget?
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Expansion- deficit. Contractionary- surplus
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How can you manage the effects and possible end results of Expansionary and Contractionary fiscal policies?
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Surplus- hold on, or pay off debts (cause opposite effect) Deficit- borrow money (cause opposite effect), or print money.
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What are the problems with timing of fiscal policy?
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Recognition, Administrative, and Operational lag.
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State and local policies, vs federal policies.
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States have to balance their budgets annually. Can not over spend, so they have to cut back spending and increase taxes. Feds have no such restrictions.
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“crowding-out effect”
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When the federal government borrow money from the public, it drives up the interest rate and reduces private investment spending.
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What is a more meaningful way to measure public debt other than simply stating the amount?
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State it as a percent of GDP
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One of the largest holders of public debt are federal agencies. The federal agency that holds the most is ....
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social security trust fund
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Primary burden of public debt.
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Interest
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What is the multiplier effect?
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it helps ascertain the amount of funds generated by an initial infusion of money
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Basic tools of fiscal policy
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Government spending and taxation
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