Examlex
If planned aggregate expenditure (PAE) in an economy equals 2,000 + 0.5Y and potential output (Y*) equals 4,400,government purchases must ________ to eliminate any output gap.
Income and Substitution Effects
The changes in consumer behavior resulting from changes in relative prices and purchasing power, affecting choices between goods.
Utility Function
A mathematical representation of how a series of choices provides different levels of happiness or satisfaction to an individual or entity.
Budget Constraint
An economic model that represents all the combinations of goods and services that a consumer can afford, given their income and prices of goods.
Relative Prices
The price of one good or service compared to another, usually indicating how many units of one good you can exchange for a unit of another.
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