Macroeconomics Chapter 10

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

1/(1-MPC)

The owner of a manufacturing company is considering whether or not to invest in a new sanding machine that costs $1,000. Net expected revenue after installation of the machine is $1,100. What is the expected rate of return?

10%

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

Aggregate

The ___ propensity to consume is the fraction or percentage of total income that is consumed?

Average

____ propensity to save equals saving divided by income?

Average

The fraction or percentage of total income that is consumed is called the?

Average Propensity to Consume

What does saving divided by income equal?

Average Propensity to Save

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

Consumption

When real interest rates ___, households tend to borrow more, consume more, and save less.

Decrease

Any factor that leads businesses to collectively expect lower rates of return on their investments ___ investment demand?

Decreases

There is a(n) _ relationship between spending and GDP?

Direct or positive

When developing macroeconomic models, economists change their focus from the relationship between consumption and ___ income to the relationship between consumption and real GDP.

Disposable

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

Disposable income

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

Disposable income

The ___ relationship between interest rates and quantity of investment conforms to the law of demand?

Inverse, negative, indirect, downward sloping, or downsloping

A firm's spending on new plants, capital equipment, machinery, and inventory is all considered ___?

Investment

Most of the fluctuations in output and employment over time are due to changes in what?

Investment

Which of the following has historically had the greatest swings in spending?

Investment

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

Investment or Capital

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

Investment, Capital

A change in consumption divided by the change in income is equal to the ___ propensity to consume?

Marginal

The change in consumption divided by the change in income is equal to the ___ propensity to consume?

Marginal

The economic term for "extra" or "a change in" is?

Marginal

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

In economic terms ___ means "extra" or "a change in"?

Marginal, margin, incremental, or delta

When real interest rates fall, households tend to borrow ___, consume ___, and save ___?

More, more, less

Consumption and disposable income have what kind of relationship?

Positive

A business is thinking about investing in a new piece of equipment. The expected ___ of return helps the business make the decision about whether or not to invest.

Rate

When developing macroeconomic models, economists change their focus from the relationship between consumption and disposable income to the relationship between consumption and?

Real GDP

The marginal propensity to save is equal to a change in ___ divided by a change in income?

Saving

Spending on _ drains off some of the additional consumption created by the increases in income?

Taxes, imports

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

The real interest rate

To economists, the term "aggregate" means?

Total, combined