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14 Cards in this Set
- Front
- Back
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Aggregate Demand
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The total quantity of output demanded at alternative price levels in a given time period, ceteris paribus
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Aggregate Supply
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The total quantity of output producers are willing and able to supply at alternative price levels in a given time period, ceteris paribus.
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The four compoenets of aggregate demand
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1. consumption
2. investment 3. government spending 4. Net exports (X-M) |
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If incomes were to increase, what would be the corresponding shift in the aggregate demand curve? If it decreases?
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rightward shift if it increases
leftward shift if it decreases |
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Disposable income is equal to
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consumption(C) + saving(S)
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Average Propensity to Consume (APC)
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total consumption / total disposable income (c / Yd)
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Marginal Propensity to Consume (MPC)
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change in consumption / change in disposable income
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Marginal Propensity to Save (MPS)
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MPS = 1 - MPC
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Average Propensity to Save (MPS)
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MPS = 1-APC
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Non-income determinants of consumption
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expectations, wealth effects, credit, taxes
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wealth effects
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A change in consumer spending caused by a change in the value of owned assets.
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Total consumption is equal to
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autonomous consumption + income-dependent consumption (C = a + bYd)
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The Consumption Function tells us
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How much consumption will be included in aggregate demand at the prevailing price level and How the consumption component of AD will change when incomes change.
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Dissaving
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consumption expenditure in excess of disposable income; a negative saving flow.
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