ECON6901 Ch27 - Basic Macroeconomic Relationships

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honestkyle
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242247
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ECON6901 Ch27 - Basic Macroeconomic Relationships
Updated:
2013-10-22 21:06:28
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ECON6901
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Basic macroeconomic relationships
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  1. What is disposable income?
    It's the income you take home after taxes
  2. What kind of relationship are consumption and saving?
    Direct
  3. Consumption and saving are determined by what?
    Disposable income
  4. What's the equation for disposable income?
    DI = C + S = 1
  5. What is the consumption schedule?
    Planned household spending
  6. What is the saving schedule?
    • Disposable income minus consumption
    • Dissaving can occur
  7. The 45 degree line on the graph of consumption and disposable income represents what?
    Equilibrium and when all disposable income is spent
  8. When the trend line falls below the equilibrium line on the graph of consumption and disposable income, what does that mean?
    Some saving has occurred.
  9. What is average propensity to consume (APC)?
    Fraction of total income consumed
  10. What is average propensity to save (APS)?
    Fraction of total income saved
  11. What is the equation for average propensity to consume (APC)?
    APC = consumption/income
  12. What is the equation for average propensity to save (APS)?
    APS = saving/income
  13. What is the marginal propensity to consume (MPC)?
    Proportion of a change in income consumed
  14. What is the marginal propensity to save (MPS)?
    Proportion of a change in income saved.
  15. What is the equation for marginal propensity to consume (MPC)?
    MPC = change in consumption/change in income
  16. What is the equation for marginal propensity to save (MPS)?
    MPS = change in saving/change in income
  17. MPC and MPS also represent what on the consumption and saving lines respectively?
    Slope
  18. Wealth depends on what?
    Flow of income and consumption
  19. What are some nonincome determinants?
    • Wealth
    • Borrowing
    • Expectations
    • Real interest rates
  20. What is the direction of the investment demand curve?
    • Downward
    • Inverse
  21. What are being compared on the investment demand curve?
    • Expected rate of return and real interest rate (r, i)
    • Investment
  22. What can cause shifts of investment demand?
    • Acquisition, maintenance, and operating costs
    • Business taxes
    • Technological change
    • Stock of capital goods on hand
    • Planned inventory changes
    • Expectations

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