What are the characteristics of a consumption function in economics? It is solely determined by government policies. It only considers autonomous spending. It relates consumption to income or wealth and interest rates. It is independent of aggregate income.

It relates consumption to income or wealth and interest rates.

What is the Autonomous Level of spending in an economic model? Spending that changes with consumer confidence. Spending that varies with government policy. Spending dependent on interest rates. Spending independent of income.

Spending independent of income.

What is the Marginal Propensity to Consume (MPC)? The change in savings from every $1 increase in aggregate income. The total consumption divided by total income. The ratio of total consumption to total savings. The change in consumption from every $1 increase in aggregate income.

The change in consumption from every $1 increase in aggregate income.

What is planned investment in an economic context? Investment that includes all unplanned inventory changes. Investment that is solely determined by government spending. Investment that was planned for the year, excluding unplanned changes. Investment that is independent of interest rates.

Investment that was planned for the year, excluding unplanned changes.

Why is it called a 'Planned' investment? Because it is determined by consumer demand. Because firms have planned to undertake a certain amount of investment during the year. Because it includes all unplanned inventory changes. Because it is solely based on government policies.

Because firms have planned to undertake a certain amount of investment during the year.

Macroeconomic Equilibrium: Consumption Functions, Aggregate Expenditure & Output Levels

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Economics - Macroeconomics

jake12testoswi Created by 10 mon ago

Cards in this deck(82)

What are the characteristics of a consumption function in economics?

What is the Autonomous Level of spending in an economic model?

What is the Marginal Propensity to Consume (MPC)?

If aggregate output/income increases by 100, how much does consumption increase assuming MPC is 1?

What is the total income equation in an economic model?

How do you find household saving in an economic model?

What is the marginal propensity to save (MPS) in an economic model?

What is planned investment in an economic context?

Why is it called a 'Planned' investment?

What does a planned investment not include?

What is planned aggregate expenditure in an economic model?

When graphed with Total Output (Y) on the horizontal axis, what is the significance of a 45˚ line?

If AE > Y, what is the unplanned change in inventories?

If AE > Y, how do firms respond?

If AE < Y, what is the unplanned change in inventories?

If AE < Y, how do firms respond?

What is the equilibrium level of output in an economic model?

What is a leakage to the spending stream in an economic context?

What is an injection to the spending stream in an economic model?

At the equilibrium level of output, what is true about leakages and injections?

What is the spending multiplier in an economic model?

Why is the change in equilibrium output greater than the change in spending?

Why is the spending multiplier smaller in the real world compared to our model?

What is a trade deficit in an economic context?

If the US dollar appreciates, what happens to the trade deficit?

If the US dollar depreciates, what happens to the trade deficit?

What is the capital account in an economic context?

How is the capital account related to the trade deficit?

What is fiscal policy in an economic context?

Who sets fiscal policy at the federal level in the United States?

What is disposable income in an economic model?

What is the intercept of planned aggregate expenditure in an economic model?

What is the slope of planned aggregate expenditure in an economic model?

What is a budget deficit in an economic context?

What is a budget surplus in an economic context?

What is the government debt in an economic context?

If the federal government is running a deficit/surplus, what happens to the federal debt?

What are automatic stabilizers in an economic context?

What is a cyclical deficit in an economic context?

What is a structural deficit in an economic context?

What is the 'full employment' level of output in an economic model?

What does aggregate demand (AD) show in an economic model?

Why is aggregate demand (AD) downward sloping in an economic model?

What is the interest rate effect on planned investment in an economic model?

What is the consumption link to interest rates in an economic model?

What is the real wealth effect in an economic model?

What causes aggregate demand (AD) to shift right in an economic model?

What causes aggregate demand (AD) to shift left in an economic model?

How does monetary policy shift the aggregate demand (AD) curve in an economic model?

How does fiscal policy shift the aggregate demand (AD) curve in an economic model?

Why does the short-run aggregate supply (SRAS) curve slope upward in an economic model?

If output rises and nominal wages remain unchanged, what happens to workers' real wages?

What factors shift the short-run aggregate supply (SRAS) curve in an economic model?

What factors shift the long-run aggregate supply (LRAS) curve in an economic model?

On the AD/AS graph, what does the P represent on the vertical axis?

On the AD/AS graph, what does Y represent on the horizontal axis?

Why is the Long-Run aggregate supply curve (LRAS) vertical in an economic model?

What is potential GDP in an economic model?

What is the natural rate of unemployment in an economic context?

What are the two components of the natural rate of unemployment?

How does demand-pull inflation work in the short run?

How does demand-pull inflation work in the long run?

How does cost-push inflation work in the short run?

How does cost-push inflation work in the long run?

What is stagflation in an economic context?

What causes stagflation in an economic model?

Why are wages sticky in an economic model?

What are the four reasons that wages are slow to respond to changes in prices in the short-run?

How does expansionary fiscal policy increase output in an economic model?

What is 'crowding out' in an economic context?

How does contractionary fiscal policy decrease output in an economic model?

What is 'crowding in' in an economic context?

What is the equation to find the Marginal Propensity to Consume (MPC)?

What is the equation to find the Marginal Propensity to Save (MPS)?

How do you find the spending multiplier in an economic model?

How do you find Y* in an economic model?

How do you find disposable income (Yd) in an economic model?

How do you find consumption (C) in an economic model?

How do you find savings (S) in an economic model?

What does C stand for in an economic model?

What does S stand for in an economic model?

What is the cycle of the spending stream in an economic context?

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Macroeconomic Equilibrium: Consumption Functions, Aggregate Expenditure & Output Levels

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