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changes in fiscal policy that stimulate aggregate demand when the economy goes into a recession without policymakers having to take any deliberate action
the offset in aggregate demand that results when expansionary fiscal policy raises the interest rate and thereby reduces investment spending
the setting of the level of government spending and taxation by government policymakers
the additional shifts in aggregate demand that result when expansionary fiscal policy increases income and thereby increases consumer spending
theory of liquidity preference
Keynes's theory that the interest rate adjusts to bring money supply and money demand into balance
Marginal propensity to Consume/Save
Fraction of incomes that that households consume rather than save.
MPC = (Change in Cosumption C)/(Dispoasal income DI)
MPS = (Change in Saving S)/(Dispoasal income DI)
MPC = MPC x Rise income
MPC = 0.8 x 100 = 80
Simple Spending Multiplier
SSM effect = (1/1-MPC) x (Change in NX)
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