Chapter 12

and a decrease in the interest rate causes

an increase in the amount of real planned investment

Dissaving occurs

at income levels less than ​$40 billion. https://i.imgur.com/39JfwOz.png

The value for the multiplier is given to be 14 Calculate both the MPS and the MPC.

mps = .07 mpc = .93

If real GDP falls below total planned expenditures the economy will see

production and employment increases .

Planned real investment is determined by the

rate (of interest)

When disposable income increases from​ $0 to ​$40 billion

saving increases by​ $0.10 for each additional dollar of disposable income. https://i.imgur.com/39JfwOz.png

Current disposable income held to buy consumption goods in the future is referred to as

saving.

Average Propensity to Save (APS)

saving/income

Suppose that when disposable income increases by​ $1,000, consumption spending increases by​ $750. Given this​ information, we know that the marginal propensity to consume​ (MPC) is

0.75.

In a simple economy​ (assume there are no​ taxes, thus Y is disposable​ income), the consumption function​ is: Upper C equals 200 plus 0.8 Upper Y In this​ economy, the level of income at which the consumer breaks even​ (consumption equals​ income) is

1000. https://i.imgur.com/nLJj6Oe.png

Which of the following statements is​ true?

At an income level of​ $0 billion there is dissaving equal to ​$30 billion.

Which of the following statements best reflects the relationship between saving and savings​?

Saving is a flow​ variable; savings is a stock variable.

If the interest rate​ increases, which of the following will​ occur?

The quantity of planned investment will decrease.

Suppose that planned savings is less than planned investment at the current level of real GDP. Which of the following will​ occur?

There will be an unplanned decrease in business​ inventories, and in the next​ period, real GDP will increase .

At equilibrium in this​ economy, what is the relationship between planned savings and planned​ investment?

They are equal.

All of the following will cause the planned investment function to shift leftward except

an increase in the interest rate.

MPC (marginal propensity to consume)

change in consumption/change in income

MPS (marginal propensity to save)

change in savings/change in income

average propensity to consume

consumption/income

Saving is the portion of

disposable income that is not consumed

In the Keynesian model equilibrium national income

equals planned​ consumption, investment,​ government, and net export expenditures.

Consumption is a

flow variable

Consumption goods are

goods purchased by households for immediate use

In the Keynesian​ model, if disposable income were to increase households would

increase both their consumption and saving

The amount of planned real investment in the economy has ________ relationship with the rate of interest.

inverse

The relationship between the MPC and the MPS indicates that the entire increase in household disposable income

is distributed between consumption and saving.

Investment is

spending by businesses on things which can be used to produce goods and services in the future.

If autonomous consumption should increase then

the consumption function shifts upward.