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ECON6901 Ch27 - Basic Macroeconomic Relationships
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What is disposable income?
It's the income you take home after taxes
What kind of relationship are consumption and saving?
Direct
Consumption and saving are determined by what?
Disposable income
What's the equation for disposable income?
DI = C + S = 1
What is the consumption schedule?
Planned household spending
What is the saving schedule?
Disposable income minus consumption
Dissaving can occur
The 45 degree line on the graph of consumption and disposable income represents what?
Equilibrium and when all disposable income is spent
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.
What is average propensity to consume (APC)?
Fraction of total income consumed
What is average propensity to save (APS)?
Fraction of total income saved
What is the equation for average propensity to consume (APC)?
APC = consumption/income
What is the equation for average propensity to save (APS)?
APS = saving/income
What is the marginal propensity to consume (MPC)?
Proportion of a change in income consumed
What is the marginal propensity to save (MPS)?
Proportion of a change in income saved.
What is the equation for marginal propensity to consume (MPC)?
MPC = change in consumption/change in income
What is the equation for marginal propensity to save (MPS)?
MPS = change in saving/change in income
MPC and MPS also represent what on the consumption and saving lines respectively?
Slope
Wealth depends on what?
Flow of income and consumption
What are some nonincome determinants?
Wealth
Borrowing
Expectations
Real interest rates
What is the direction of the investment demand curve?
Downward
Inverse
What are being compared on the investment demand curve?
Expected rate of return and real interest rate (r, i)
Investment
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
Author
honestkyle
ID
242247
Card Set
ECON6901 Ch27 - Basic Macroeconomic Relationships
Description
Basic macroeconomic relationships
Updated
2013-10-23T01:06:28Z
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