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(a) MPC = 0.9.(b) MPS = 0.1.(c...View Answer
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(a) MPC = 0.9.(b) MPS = 0.1.(c...
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The size of the MPC and the mu...View Answer
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The size of the MPC and the mu...
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(b) The break-even level of income is 52...View Answer
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(b) The break-even level of income is 52...
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The investment demand curve relates inve...View Answer
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The investment demand curve relates inve...
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(a) The investment demand schedule gives the amount of investment that would be undertaken at various rates of interest.The rate of interest that an investor would be willing to pay for any amount of investment will not exceed its expected rate of net profit.Therefore, the expected rate of profit determines the interest rate (or price) that investors would be willing to pay for various amounts of investment and this is the definition of an investment demand schedule.
(b) Investment is $90 billion.
(c) The inverse relationship stems from the equality of the expected rate of profit with the interest rate at each level of investment as explained in part (a).There are fewer types of investment that yield a large expected net profit and more and more investments that will yield a lower rate of return.Therefore, at high rates of interest there is a smaller amount of investment that will be undertaken because fewer investments yield an expected return high enough to cover the high interest rate.As the rate declines, more and more investments will yield enough return to cover the lower rates of interest.
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(a) The investment demand schedule gives the amount of investment that would be undertaken at various rates of interest.The rate of interest that an investor would be willing to pay for any amount of investment will not exceed its expected rate of net profit.Therefore, the expected rate of profit determines the interest rate (or price) that investors would be willing to pay for various amounts of investment and this is the definition of an investment demand schedule.
(b) Investment is $90 billion.
(c) The inverse relationship stems from the equality of the expected rate of profit with the interest rate at each level of investment as explained in part (a).There are fewer types of investment that yield a large expected net profit and more and more investments that will yield a lower rate of return.Therefore, at high rates of interest there is a smaller amount of investment that will be undertaken because fewer investments yield an expected return high enough to cover the high interest rate.As the rate declines, more and more investments will yield enough return to cover the lower rates of interest.
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The Great Recession of 2008-2009 altered...View Answer
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The Great Recession of 2008-2009 altered...
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By definition, the multiplier is related...View Answer
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By definition, the multiplier is related...
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Consumption and saving are directly rela...View Answer
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Consumption and saving are directly rela...
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The investment demand curve would shift ...View Answer
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The investment demand curve would shift ...
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a) The break-even level of income is 125 where saving equals zero.Households dissave by borrowing or by dipping into accumulated savings.
(b) The MPC and MPS represent the slopes of the consumption and savings schedules, respectively.The fact that MPC and MPS are constant means that the schedules will be straight-line graphs.However, the slope can be constant and still not be a constant proportion of income as represented on the horizontal axis.In fact, the only time the MPC and the APC would be the same would be along the 45-degree line where the slope is equal to 1 and the ratio of spending to income is equal to 1 at all levels.
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a) The break-even level of income is 125 where saving equals zero.Households dissave by borrowing or by dipping into accumulated savings.
(b) The MPC and MPS represent the slopes of the consumption and savings schedules, respectively.The fact that MPC and MPS are constant means that the schedules will be straight-line graphs.However, the slope can be constant and still not be a constant proportion of income as represented on the horizontal axis.In fact, the only time the MPC and the APC would be the same would be along the 45-degree line where the slope is equal to 1 and the ratio of spending to income is equal to 1 at all levels.
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During the Great Recession of 2008-2009,...View Answer
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During the Great Recession of 2008-2009,...
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The marginal propensity to consume is th...View Answer
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The marginal propensity to consume is th...
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In the aggregate expenditures model one focus is on the consumption schedule which is the relationship between the consumption part of aggregate expenditures and disposable income.Graphically this relationship is illustrated with consumption measured on the vertical axis and disposable income measured on the horizontal axis.If the two were equal, the relationship would follow a straight line along the 45-degree line.Historical data and the aggregate expenditures model suggest that it is a direct relationship, and that households spend a larger proportion of a small income than of a large disposable income.In other words, consumption as a proportion of income falls as disposable income increases.
Since saving is the difference between disposable income and consumption spending, the saving schedule also shows a direct relationship between saving and disposable income.Graphically, it is depicted with saving on the vertical axis and disposable income measured on the horizontal axis.At very low income levels, dissaving is believed to occur and saving increases proportionally as income rises.
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In the aggregate expenditures model one focus is on the consumption schedule which is the relationship between the consumption part of aggregate expenditures and disposable income.Graphically this relationship is illustrated with consumption measured on the vertical axis and disposable income measured on the horizontal axis.If the two were equal, the relationship would follow a straight line along the 45-degree line.Historical data and the aggregate expenditures model suggest that it is a direct relationship, and that households spend a larger proportion of a small income than of a large disposable income.In other words, consumption as a proportion of income falls as disposable income increases.
Since saving is the difference between disposable income and consumption spending, the saving schedule also shows a direct relationship between saving and disposable income.Graphically, it is depicted with saving on the vertical axis and disposable income measured on the horizontal axis.At very low income levels, dissaving is believed to occur and saving increases proportionally as income rises.
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When wealth increases, it shifts the con...View Answer
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When wealth increases, it shifts the con...
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(a) APC = .75 ($6,000/$8,000)....View Answer
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(a) APC = .75 ($6,000/$8,000)....
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Investment spending is based to a large ...View Answer
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Investment spending is based to a large ...
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The average propensity to consume is def...View Answer
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The average propensity to consume is def...
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First, the economy has continuous flows ...View Answer
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First, the economy has continuous flows ...
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