Macroeconomics Chapter 13

Front 1

consumption function

Back 1

The relationship between consumption and disposable personal income

Front 2

marginal propensity to consume (MPC)

Back 2

MPC=ΔC/ΔYd

yd= disposable personal income
used in consumption function

Front 3

Personal saving

Back 3

disposable personal income not spent on consumption during a particular period; the value of personal saving for any period is found by subtracting consumption from disposable personal income for that period

Front 4

saving function

Back 4

relates personal saving in any period to disposable personal income in that period

Front 5

marginal propensity to save

Back 5

MPS=ΔS/ΔYd

change of personal saving/ change disposable personal income
used in saving function

Front 6

MPC + MPS =
marginal propensity to consume + marginal propoensity to save

Back 6

1

Front 7

current income hypothesis

Back 7

consumption in any one period depends on income during that period, or current income

Front 8

Permanent income

Back 8

the average annual income people expect to receive for the rest of their lives

Front 9

permanent income hypothesis

Back 9

assumes that consumption in any period depends on permanent income

Front 10

wealth effect

Back 10

The tendency for price level changes to change real wealth and consumption

Front 11

interest rate effect

Back 11

a higher price level reduces the real quantity of money, raises interest rates, and reduces investment

Front 12

international trade effect

Back 12

The impact of different price levels on the level of net exports