Chapter 19: The Spending Allocation Model
consumption share the proportion of GDP that is used for consumption; equals consumption divided by GDP, or C/Y.
crowding out the decline in private investment owing to an increase in government purchases.
equilibrium interest rate the interest rate that equates the sum of the consumption, investment, and net export shares to the share of GDP available for nongovernment use.
exchange rate the price of one currency in terms of another in the foreign exchange market.
government purchases share the proportion of GDP that is used for government purchases; equals government purchases divided by GDP, or G/Y.
investment share the proportion of GDP that is used for investment; equals investment divided by GDP, or I/Y. Sometimes called investment rate.
national saving rate the proportion of GDP that is saved, neither consumed nor spent on government purchases; equals national saving divided by GDP, or S/Y.
net exports share the proportion of GDP that is equal to net exports; equals net exports divided by GDP, or X/Y.