Match each of the terms on the left with its definition on the right. Click on the term first and then click on the matching definition. As you match them correctly they will move to the bottom of the activity.
Marginal propensity to consume (MPC) Marginal propensity to save (MPS) Autonomous change in aggregate spending Multiplier Consumption function Aggregate consumption function Planned investment spending Accelerator principle Inventories Inventory investment Unplanned inventory investment Actual investment spending Planned aggregate spending Income–expenditure equilibrium Income–expenditure equilibrium GDP Keynesian cross | the total amount of planned spending in the economy; includes consumer spending and planned investment spending. the increase in consumer spending when disposable income rises by $1. Because consumers normally spend part but not all of an additional dollar of disposable income, MPC is between 0 and 1. unplanned changes in inventories, which occur when actual sales are more or less than businesses expected. the investment spending that firms intend to undertake during a given period. Planned investment spending may differ from actual investment spending due to unplanned inventory investment. an initial rise or fall in aggregate spending at a given level of real GDP. an equation showing how an individual household’s consumer spending varies with the household’s current disposable income. the ratio of total change in real GDP caused by an autonomous change in aggregate spending to the size of that autonomous change. a diagram that identifies income–expenditure equilibrium as the point where the planned aggregate spending line crosses the 45-degree line. stocks of goods and raw materials held to facilitate business operations. the proposition that a higher rate of growth in real GDP results in a higher level of planned investment spending, and a lower growth rate in real GDP leads to lower planned investment spending. a situation in which aggregate output, measured by real GDP, is equal to planned aggregate spending and firms have no incentive to change output. the value of the change in total inventories held in the economy during a given period. Unlike other types of investment spending, inventory investment can be negative, if inventories fall. the fraction of an additional dollar of disposable income that is saved; MPS is equal to 1 − MPC. the level of real GDP at which real GDP equals planned aggregate spending. the relationship for the economy as a whole between aggregate current disposable income and aggregate consumer spending. the sum of planned investment spending and unplanned inventory investment. |