Intermediate Macroeconomics ECN3082 L, Mussurov Altay

The price of a good measured in units of currency.

Exists if a producer can produce more of a good than all other producers.

The inverse relationship between all spending on domestic output and the average price level of that output. AD measures the sum of consumption spending by households, investment spending by firms, government purchases of goods and services, and the net exports bough by foreign customers.

The sum of all income earned by suppliers of resources in the economy. AI=GDP.

The sum of all spending from four sectors of the economy. GDP = C+I+G+Xn.

The positive relationship between the level of domestic output produced and the avg. price level of that output.

The process of summing the microeconomic activity of households and firms into a more macroeconomic measure of economic activity.

To predict how a change in one variable affects a second, we hold all other variables constant. This is also referred to as the “ceteris paribus” assumption.

Production of the combination of goods and services that provides the most net benefit to society.

When the value of a currency is rising (falling) relative to another currency, it is said to be appreciating (depreciating)

The amount of money demanded as an asset. As nominal interest rates rise, the oc of holding money begins to rise and you are more likely to lesson your asset d for money.

Anything owned by the bank or owed to the bank.

Mechanisms built into the tax system that automatically regulate, or stabilize, the macroeconomy as it moves through the business cycle by changing net taxes collected by the government. These stabilizers increase a deficit during a recessionary period and increase a budget surplus during an inflationary period, without any discretionary change on the part of the government.

The amount of consumption that occurs no matter the level of disposable income. In a linear consumption function, this shows up as a constant and graphically it appears as the y intercept.

The level of investment determined by investment demand. It is autonomous because it is assumed to be constant at all levels of gdp.

The amount of saving that occurs no matter the level of disposable income. In a linear saving function, this shows up as a constant and graphically it appears as the y intercept.

The proportion of total income paid to taxes. It is calculated by dividing the total taxes owed by the total taxable income.