Econ Chapter 10 2.0 smart book

If disposable income increases from $410 to $430 billion and savings increases from $5 to ______ billion, The marginal prosperity to save is 0.25.

$10

marginal propensity to consume equals 0.6 the change in income is $12 billionwhat is the change in consumption?

$7.2 billion

Economists define personal saving as "not spending" or as "that part of _____ income not consumed."

- disposable - discretionary

Which of the following two variables change by more than an initial change in spending due to the multiplier effect

- income - output

Which of the following two variables change by more than an initial change in spending due to the multiplier effect?

- income - output

The fraction of any change in income not consumed is, by definition, the _____ _____ _____. This explains why the marginal propensity to consume plus this fraction of any change equals one.

- marginal - propensity - save

Changes in investment consumption, exports and government purchases that ultimately change output and income by more than the initial charge in the spending is called the ____ effect.

- multiplier - multiplying

Changes to which of the following lead to the multiplier effect?

- net exports - investment - Government spending - consumption

As a result of the multiplier effect , a change in ________ ultimately changes output and income by more than initial change.

- spending - expenditures - investment - consumption

When the initial change in spending is $20 billion and the resulting change in GDP $80 billion, the multiplier is _____.

-4 or four

Based on the figure, what is the marginal propensity to save

0.25

Based on the figure, what is the marginal propensity to save?

0.25

disposable income increases from $450 to $470 billion and savings increases from $15 to $20 billion what is the marginal propensity to save (MPS

0.25

Disposable income rises by $20 billion to $40 billion. Households consume $15 billion of the increase and save $5 billion of that incomeis the propensity to consume (MPC)

0.75

Disposable income rises by $20 billion to 40 billion Households consume \$15 bl billion the increase and save $5 billion of that incomeWhat is the margin propensity to consume (MPC)?

0.75

The sum of MPC and MPS equals

1

The direct relationship between MPC and the multiplier is shown in the following equation

1/(1-MPC)

If the change in real GDP is $90 billion and the initial change in spending is $30 billion, the multiplier is

3.00

Economists use what term to mean "total" or "combined"?

Aggregate

What does the multiplier explain?

An increase or decrease in GDP

A movement along the consumption schedule represents a change in the amount consumed and solely caused by a change in real ___.

GDP

Because the fraction of any change in income not consumed is saved, which of the following equations is true

MPC + MPS = 1

Which of the following state how economists define the concept of personal saving

Not spending; That part of disposable income not consumed

Comparing the expected rate of return to the real interest rate in deciding whether or not invest is the same as comparing the marginal _____ and marginal ______.

benefit and cost

Select all that apply To economists , the term "aggregate " means

combine and total

Marginal propensity to consume is the slope of what schedule?

consumption

The ______ schedule shows the various amounts that households would plan to spend at each of the various levels of disposable income

consumption

The most significant factor for determining a nation's levels of _____ and ____ is disposable income.

consumption; savings

When real interest rates _______(increase/decrease)households tend to borrow more, consume more, and save less

decrease

The relationship between spending and GDP is?

direct

There is a(n) _____ relationship between spending and GDP

direct

In the figure, each point on the 45 degree line is where household consumption equals ______.

disposable income

The consumption schedule shows the various amounts that households plan to consume at each level of

disposable income

What is the most significant factor for determining a nation's level of consumption and saving?

disposable income

Consumption is positively related to disposable _____. (one word)

income

Real interest rates are rates adjusted for what?

inflation

A firm's spending on new plantscapital equipment, machinery , and inventory is all considered ____.

investment

Expected profits and interest rates are the two basic determinants of _____ spending.

investment

_______ spending consists of expenditures on new plants, capital equipment, machinery, and inventories

investment

Expected profits and interest rates are the two basic determinants of what?

investment spending

The change consumption divided by the change in income is equal to the ____ propensity to consume.

marginal

in economic terms _______ means "extra" or " a change in."

marginal

Investment decisions are decisions based on

marginal benefit and marginal cost

The ratio of a change in consumption to a change in the income that caused the consumption change is called the

marginal propensity to consume

A change in saving divided by a change in income is equal to the

marginal propensity to save

When real interest rates fall, households tend to borrow ____, consume ______ and save _______.

more, more, less

1 / (1 - MPC) is what formula?

multiplier formula

The MPC plus the MPS equals:

one

Consumption and disposable income have what kind of relationship?

positive

A movement along a consumption schedule represents a change in the amount consumed and is solely caused by a change in ____.

real GDP

In the figure, the consumption schedule shifts down when households consume less at each level of

real GDP

The nominal interest rate minus the rate of inflation equals what?

real interest rate

In the figure , marginal propensity to _____ equals 5 divided by 20.

save

The marginal propensity to save is equal to a change in _____ divided by a change in income.

saving

The marginal propensity to consume is the ____ of the consumption schedule.

slope

Consumption equals disposable income at every point on the

the 45 degree line

True or false: The multiplier works both ways. It can explain an increase or decrease in GDP

true

household consumption is originally at C 0 but households then decide to consume more at each level of real GDP, then the consumption schedule

upward