Wealth is the monetary value of all assets that households have

Along with the increase in income, the desire and purchasing power of households to make consumption expenditures also increases. This linear and positive relationship between income and consumption expenditures is called consumption function.

Since the value of planned aggregate expenditures are greater than the value of actual production, this economy encounters with an inflationary pressure at the current income level.

Cyclical unemployment is the unemployment caused by the recessions occasionally occurred in economic life. In agricultural countries, most common type is seasonal unemployment.

The actual expenditures in the economy are always equal to the income and the production. These expenditures include stock variables.

The basic idea in mercantilism is the wealth of Society.

Marginal propensity to save is the ratio of the saving change to the income change:

Government concept and its role in the economy and tools it uses while performing this role have been discussed for many centuries. The government interferes in economic and social lives by ensuring economic growth and development, providing economic stability and fair income distribution. Views related to tasks which government should undertake in an economy have been varying noticeably during history. The idea of government’s intervention to economy started with Mercantilists in the 16th century.

Net effect of public expenditure and tax changes on income can be calculated as:

Since APC + APS = 1, APS will be 0.75 if APC = 0.25.

Net export is the difference between revenue obtained by exporting goods and services to foreign countries and payment made by importing goods and services from foreign countries. If net exports take a positive value, the country has a surplus in foreign trade. If net exports have a negative value, the country will have foreign trade deficit. For example, Turkey has been a country having foreign trade deficit for many years; that is, her export volume is less than her import volume.

One of the most important subjects that supply-side policies insistto accelerate economic growth rate is the tax system of the country. These economists state that tax system in a country should be reformed in a manner which tax rates should have been reduced in order to encourage willingness to work, saving and investment.

Contractionary fiscal policy is the fiscal policy that aims to decrease aggregate expenditures by reducing government spending and/or increasing taxes.

Most typical temporary but widespread unemployment types are cyclical and seasonal unemployment. Cyclical unemployment is the unemployment caused by the recessions occasionally occurred in economic life and it occurs during contraction of production volume experienced from time to time.

The total income of the country is being used in four different ways. This income is partly transferred to government as taxes, partly used to purchase the domestically produced goods and services, in other words, consumed, partly spent for imported goods and services and partly used for savings.

In case of changes in public expenditures and taxes are the same, the numerical value of net multiplier being equal to 1 is called as balanced budget multiplier.

The right versions of the statements are as follows. Equilibrium income can be achieved at the level of underemployment or overemployment. The level of income depends on aggregate demand or aggregate expenditures. Keynes links the deviations from full employment to the inadequacy of aggregate expenditures in the economy.

Business cycle is the short term fluctuations in production volume.

General budget includes the budgets of central administration (The Grand National Assembly of Turkey, Presidency of the Republic and ministries). On the other hand, special budget refers to the budgets of public institutions having legal entity although each belongs to a ministry.

Leakages, expenditures, injections and income are important while determining the level of equilibrium income of the economy.