CLEP Unit 2 Terms Part 2

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CLEP Unit 2 Terms Part 2
2011-10-30 16:04:58
unit terms part

CLEP Macroecon unit 2 terms part 2
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  1. transfer payments
    income received but not earned
  2. underground economy (black market)
    goods sold illegally and therefore the income is not reported
  3. consumption function
    the relationship between consumption and income
  4. Marginal Propensity to Consume (MPC)
    the rate of consumption compared to our rate of income
  5. Permanent Income vs. Transitory Income
    • Permanent: National income plus income received but not earned, minus income earned but not received
    • Transitory: Difference between national and permanent income
  6. autonomous consumption
    consumption spending that is independent of the level of income
  7. autonomous investment
    investment that is independent of the level of income
  8. Aggregate Expenditure (AE)
    total amount of spending in our economy, including consumption spending, production investment spending, government spending, and money spent by foreigners on USA goods
  9. Income Multiplier
    when AE exceeds AS
  10. Paradox of Thrift
    when AS exceeds AE
  11. frictional unemployment
    when workers quit a job to look for another
  12. cyclical unemployment
    when workers are laid-off because the economy stinks
  13. structural unemployment
    workers lose their job because they have been replaced by technology or job is moved overseas
  14. underemployed workers
    workers employed in jobs that do not utilize their productive talents or experience
  15. labor force
    people who are gainfully employed or actively seeking employment
  16. full employment
    everyone who wants a job has a job
  17. recessionary gap
    the amount by which AE falls short of the level needed to generate equilibrium national income at full employment without inflation
  18. inflationary gap
    the amount by which AE exceeds the AE level needed to generate equilibrium national income at full employment without inflation
  19. fiscal policy
    the governments ability to tax and spend
  20. tax multiplier
    the multiple by which the equilibrium level of natoinal income changes when a dollar charge in taxes occurs
  21. budget deficit bs. budget surplus
    • budget deficit: government spending exceeds tax revenues
    • budget surplus: tax revenues exceed government spending
  22. capital deepening
    a rise in the ration of capital to labor
  23. countercyclical fiscal policy
    fiscal policy designed to moderate the severity of the business cycle
  24. administrative log
    the time interval between deciding on an appropriate policy and the execution of that policy