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EMBARGO: In general, any sort of restriction on foreign trade, in practice, the restriction of exports destined for sale in another country. Unlike tariffs, import quotas, and other nontariff barriers that protect domestic producers from competition, embargoes are intended to punish the export destination country. One of the more famous embargoes in recent decades was the oil embargo that several middle-eastern countries imposed on the United States in the 1970s. This caused higher gasoline prices in the United States, created all sorts of havoc for our economy, and pretty much achieved the punishment objective. The United States is also prone to throw up an embargo here or there when another country acts against our political wishes.
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                           SLOPE, GOVERNMENT PURCHASES LINE: The positive slope of the government purchases line is also termed the marginal propensity for government purchases (MPG). This slope is greater than zero but less than one, reflecting induced government purchases. The slope of the government purchases line affects the slope of the aggregate expenditures line and thus also affects the magnitude of the multiplier process. | Government Purchases Line | 
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The government purchases line shows the relation between government purchases by the government sector and the level of aggregate income or production. The income and production measures most commonly used are national income and gross domestic product.A representative government purchases line is presented in the exhibit to the right. This red line, labeled G in the exhibit, is positively sloped, indicating that greater levels of income or production generate greater government purchases by the government sector. This positive relation indicates that the government sector, especially state and local governments, is inclined to use increasing tax revenue generated by an expanding economy for government purchases. The government purchases line graphically illustrates the government purchases-income relation for the government sector, which plays a key role in the aggregate expenditures line used in Keynesian economics to identify equilibrium income and production. The slope of the government purchases line presented here is positive, but less than one. In fact, the slope of the government purchases line is numerically equal to the marginal propensity for government purchases. In this case the slope is equal to 0.05. The positive slope reflects induced government purchases--more income means more government purchases. Click the [Slope] button to illustrate. To illustrate the equality between slope and the marginal propensity for government purchases, consider the equations for each. The slope of the government purchases line is specified as the "rise" over the "run." The rise is the change in government purchases measured on the vertical axis and the run is the change in income measured on the horizontal axis. | slope | = | rise
run | = | change in government purchases
change in income |
The marginal propensity for government purchases (MPG) is the incremental change in government purchases resulting from an incremental change in income. | MPG | = | change in government purchases
change in income |
The slope of the government purchases line is the marginal propensity for government purchases, they are one and the same.The positive slope of the government purchases line reflects induced government purchases, which is government purchases that depend on the level of income. If the aggregate economy has more income, then the government sector is induced to undertake additional government purchases. Of course, a drop in aggregate income induces the government sector to reduce expenditures.
Recommended Citation:SLOPE, GOVERNMENT PURCHASES LINE, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: May 16, 2024].
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YELLOW CHIPPEROON
[What's This?]
Today, you are likely to spend a great deal of time at a going out of business sale looking to buy either a T-shirt commemorating yesterday or a pair of handcrafted oven mitts. Be on the lookout for small children selling products door-to-door.
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Parker Brothers, the folks who produce the Monopoly board game, prints more Monopoly money each year than real currency printed by the U.S. government.
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"Try not to become a man of success but rather to become a man of value. " -- Albert Einstein
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NAG
Net Annual Gain
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