CLEP Unit 2 Terms Part 2

income received but not earned

goods sold illegally and therefore the income is not reported

the relationship between consumption and income

the rate of consumption compared to our rate of income

• Permanent: National income plus income received but not earned, minus income earned but not received
• Transitory: Difference between national and permanent income

consumption spending that is independent of the level of income

investment that is independent of the level of income

total amount of spending in our economy, including consumption spending, production investment spending, government spending, and money spent by foreigners on USA goods

when AE exceeds AS

when AS exceeds AE

when workers quit a job to look for another

when workers are laid-off because the economy stinks

workers lose their job because they have been replaced by technology or job is moved overseas

workers employed in jobs that do not utilize their productive talents or experience

people who are gainfully employed or actively seeking employment

everyone who wants a job has a job

the amount by which AE falls short of the level needed to generate equilibrium national income at full employment without inflation

the amount by which AE exceeds the AE level needed to generate equilibrium national income at full employment without inflation

the governments ability to tax and spend

the multiple by which the equilibrium level of natoinal income changes when a dollar charge in taxes occurs

• budget deficit: government spending exceeds tax revenues
• budget surplus: tax revenues exceed government spending

a rise in the ration of capital to labor

fiscal policy designed to moderate the severity of the business cycle

the time interval between deciding on an appropriate policy and the execution of that policy