Carefully define the following terms and explain their importance in the study of macroeconomics:

Question

a. expenditure schedule
b. saving schedule
c. equilibrium GDP
d. leakages schedule
e. injections schedule

Answer 1

a. The expenditure schedule shows the relationship between national income (GDP) and total spending. The components of spending are consumption, investment, government spending, and net exports. This is the demand side of the economy.
b. The saving schedule indicates the level of total saving for the economy at various levels of disposable income. It can be derived from the consumption schedule. Because disposable income is either consumed or saved, the saving schedule can be computed as S = DI ? C where S = saving schedule, DI = disposable income, and C = consumption schedule.
c. Equilibrium GDP refers to a condition in which neither consumers nor business firms have any incentive to change their behavior. They are content with things as they are. The economy tends to move toward an equilibrium, or to remain at equilibrium, unless some underlying variable changes.
d. The leakages schedule indicates the level of leakages from the flow of income and spending at various levels of disposable income. Leakages include saving, taxes, and imports.
e. The injections schedule indicates the level of injections into the flow of income and spending at various levels of disposable income. Injections include investment spending, government spending, and exports. At equilibrium GDP the level of leakages must equal the level of injections.