ECON 2010 : Test 3 Review
Document Summary
John maynard keynes: general theory of employment, interest, and money, pae, c+i+nx+g, planned investment determined by inventory, surplus plus planned investment, consumptiom, purchases of goods,services, and consumer durables, disposable income=(y-t, c=c+mpc(y-t, short run equilibrium, where y=pae. Induced expenditure- portion of spending that is dependent on output: autonomous expenditure-portion independent of output, fiscal policy, changes how money is spent, automatic stabilizers-policy that goes into effect automatically(built into laws, unemployment compensation, monetary policy, changes money supply. Ad slopes downward because as inflation decreases, spending and output. Whether stabilization policies are implemented or not depends on speed of self- correction. Inflation hawk-someone committed to keeping inflation rates low. Inflation dove-not committed to maintaining low inflation rates: supply-side policy- policy effecting potential output, ex. Building better highway systems: marginal tax rates-tax paid on an additional dollar of income(if you make one more dollar, how much of it would be taxed?, average tax rate- total taxes divded by income.
