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ECN 204 Chapter Notes - Chapter 10: Real Interest Rate, Disposable And Discretionary Income, Marginal Cost

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Ryerson University
Department
Economics
Course
ECN 204
Professor
All

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Document Summary

Ecn 204 chapter 10 basic macroeconomic relationships. Economists de ne personal saving as not spending or as that part of disposable (after tax) income not consumed . Saving (s) = disposable income (di) - consumption (c) Disposable income is the most signi cant factor that determines a nation"s levels of consumption. In the aggregate households increase their spending as their disposable income rises and spend a larger proportion of a smaller disposable income than a larger disposable income. Shows the relationship between saving and di but that saving is a smaller proportion of a small di than a large di. Average propensity to consume (apc) the fraction (or %) of total income that is consumer is the. Average propensity to save (aps) the fraction (or %) go total income that is saved. Marginal propensity to consumer (mpc) the proportion (or fraction) of any change in income consumed with marginal meaning extra or a change in.

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Related Questions

The following table is a consumption schedule. Assume taxes and transfer payments are zero and that all saving is personal saving.

(GDP = DI)

C

S

APC

APS

$1,500

$1,540

$_____

1.027

–0.027

$1,600

$1,620

_____

1.013

–0.013

$1,700

$1,700

_____

_____

_____

$1,800

$1,780

_____

0.989

0.011

$1,900

$1,860

_____

0.979

0.021

$2,000

$1,940

_____

_____

_____

$2,100

$2,020

_____

0.962

0.038

$2,200

$2,100

_____

_____

_____

Compute saving at each of the eight levels of disposable income and the missing average propensities to consume and to save.

1. The break-even level of disposable income is $________.

2. As disposable income rises, the marginal propensity to consume remains constant. Between each two GDPs the MPC can be found by dividing $________ by $________, and is equal to _______.

3. The marginal propensity to save also remains constant when the GDP rises. Between each two GDPs the MPS is equal to $________ divided by $________, or to _______.

The average propensity to consume (APC) equals

the change in real disposable income divided by the change in consumption expenditures.

the change in consumption expenditures divided by the change in real disposable income.

real disposable income divided by consumption expenditures.

consumption expenditures divided by real disposable income.

The consumption function shows how much

households plan to consume per year at each level of real disposable income.

households plan to consume per year at each level of savings.

households plan to consume per year at each possible interest rate.

real disposable income people will earn at each income tax bracket.

Saving is

the accumulation of past periods of savings while savings is the amount of disposable income that is not consumed in a given period of time.

the amount one does not consume in a given period of time while savings is the accumulation of past periods of saving.

the difference between disposable income and spending on goods and services while savings is the difference between real GDP and disposable income.

the difference between real GDP and disposable income while savings is the difference between disposable income and consumption spending.

Thinking as an economist would, which is true of investment?

Investment represents spending on capital goods.

Investment is a stock concept.

Investment is putting money into stocks and bonds.

It is the portion of disposable income that is not used for consumption or saving.

An appreciation of the U.S. dollar ________ the price of U.S. imports, and ________ the price of U.S. exports.

lowers, lowers

increases, increases

increases, lowers

lowers, increases

QUESTION 33

Other things being equal, if input prices rise in a country, then there would be

cost-push inflation.

demand-pull inflation.

cost-push deflation.

more production and a lower price level.

True or False, if false explain.

1. Saving is defined simply as disposable income minus consumption.

2. If the consumption function has a slope of 4/5, then the saving function must have a slope of .2.

3. Any factor that would shift the consumption function upward would shift the saving function upward also.

4. The average propensity to consume (APC), like the MPC, is simply the slope of the basic, Keynesian consumption function.

5. Given a typical shaped consumption function, as the level of income rises, the APC rises as well.

6. If a consumption function graphically starts at a point above the origin (i.e., has a positive vertical axis intercept), then the saving function must begin below the origin.

7. A dramatic rise in household inflationary expectations could be expected to shift the consumption function downward and the saving function upward.