Macro Chapter 5 Flashcards

A fixed amount paid by individuals, independent of their income or consumption

A tax levied as a constant percentage of labour income

A tax levied as a constant percentage of capital income

A tax levied as a constant percentage of consumption expenditure

G = T (Government expenditure equals tax revenue collected)

Aggregate labour supply (Ns) equals aggregate labour demand (Nd)

Aggregate output equals aggregate consumption plus government spending

Variables determined outside the model (G,z,K,h and the functional forms of utility and production)

A variable that is determined inside the model (c, L, Ns, Nd, T, Y, π, w)

Marginal rate of transformation (MRT) , Marginal Product of Labour (MPN)

1. Static (does not account for savings or investment decisions over time
2. Closed Economy
3. Government spending is not valued

A situation where it is not possible to make at least one individual better-off without making someone else worse-off

Under certain conditions, a competitive equilibrium is pareto-optimal

Under certain conditions, a pareto-optimum is a competitive equilibrium