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9 Cards in this Set
- Front
- Back
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1.What is the consumption schedule? The saving schedule?
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consumption-a schedule showing the amounts of households plan to spendfor consumer goods at different levels of disposable income saving-a schedule that showsthe amount households plan to save (plan not to spend for consumer goods) at different levels of disposable income |
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2.What is MPC? MPS? How are they related to each other?
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marginal propensity to consume- the fraction of any change in disposable income spent for consumer goods; equal to the change in consumption divided by the change in disposable income marginal propensity to save-The fraction of any change in disposable income that housholds save; equal to the change in savings divided by the change in dispoable iincome. |
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3.Identify the major determinants that influence both consumption and savings.
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wealth, borrowing, expectations, interest rates |
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4.What is the “expected rate of return”?
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expected revenue- cost ofinvestment =profit. divide profit by investment cost =% or expected rate |
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5.What is the economic significance of the “real rate of interest”?
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figure in cost of dollars to purchase capital(investment) if more than expected rate of return = not profitable |
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6.What is the investment demand curve? What is the shape of this curve? Identify the factors that influence this curve.
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a curve that shows the amount of investment demanded by an economy at a series of real interest rates. curve is downward, reflecting inverse relationship between real interest rate(finaced price) and quantity of investment demand |
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7.What factors contribute to the instability and volatility of investment levels?
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durability, irregularity of innovation, variability of profits, variability of expectations |
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8.What is the multiplier effect? What impact does it have on the economy? How is it calculated?
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multiplier effect determines how much larger that change will be. |
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9.THE LAST WORD: Be prepared to comment on the economic implications and underlying theory contained of this article.
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