Macroeconomics

Consumer price index (CPI):

A measure of the

overall level of prices that shows the cost of a fixed

basket of consumer goods relative to the cost of the

same basket in a base year.

Consumption:

Goods and services purchased by

consumers.

Consumption function:

A relationship showing

the determinants of consumption; for example, a 

relationship between consumption and disposable 

income, C

 C(Y  T ).

Contractionary policy:

Policy that reduces aggre-

gate demand, real income, and employment. (Cf.

expansionary policy.)

Convergence:

The tendency of economies with

different initial levels of income to become more

similar in income over time.

Corporate income tax:

The tax levied on the ac-

counting profit of corporations.