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I. Chapter Nine
Aggregate Expenditure
10
Economics
Undergraduate 1
08/08/2011

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Term
consumption function
Definition
the relationship in the economy between consumption and income, other things constant
Term
marginal propensity to consume (MPC)
Definition
the fraction of a change in income that is spent on consumption; the change in consumption divided by the change in income that caused it
Term
marginal propensity to save (MPS)
Definition
the fraction of a change in income that is save; the change in saving divided by the change in income that caused it
Term
saving function
Definition
the relationship between saving and income, other things constant
Term
net wealth
Definition
the value of all assets minus liabilities
Term
life-cycle model of consumption and saving
Definition
young people borrow, middle-agers pay of debts and save, and older people draw down their savings; on average, net savings over a lifetime is usually little or nothing
Term
investment function
Definition
the relationship between the amount businesses plan to invest and the economy's income, other things constant
Term
autonomous
Definition
a term that means "independent"; for example, autonomous investment is independent of income
Term
government purchase function
Definition
the relationship between government purchases and the economy's income, other things constant
Term
net export function
Definition
the relationship between net exports and the economy's income, other things constant
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