Econ 103: Exam 1 Study Guide with Complete Solutions

automatic stabilizers - ANSWER-revenue and expenditure items in the federal budget that automatically change with the state of the economy in such a way as to stabilize the economy. multiplier effect - ANSWER-- the increase in final income arising from any new injection of spending. - the size of the multiplier depends upon household's marginal decisions to spend, called the marginal propensity to consume (mpc), or to save, called the marginal propensity to save (mps). marginal propensity to consume (mpc) - ANSWER-household's marginal decisions to spend marginal propensity to save (mps) - ANSWER-household's marginal decisions to save expansionary fiscal policy - ANSWER-- increases government spending (G) or cuts taxes (T). - it is also any combination of the two. - it is used to stimulate the economy when there is recession and unemployment in the economy. create new jobs in the economy - ANSWER-expansionary fiscal policy is used by the government to ______ inflation, unemployment, economic growth - ANSWER-economics is best defined as the study of: ____, ____, and ____ the nation's economy as a whole - ANSWER-macroeconomics is best described as the study of: _________ increase budget deficit, reduce budget surplus, increase national debt - ANSWER-when the government increases spending or cuts taxes, it is more likely to ________, or _______ and _______.