Aggregate Expenditure

Question 1

Disposable Income equation

Answer 1

Yd= Y - T

Question 2

Consumption function

Answer 2

C= a + b(Yd)

Question 3

Saving function (2)

Answer 3

S= Y - T - C
S= Yd - a - b(Yd)

Question 4

Marginal Propensity to Consume function

Answer 4

MPC= /\C / /\Yd

Question 5

Marginal Propensity to Save function (2)

Answer 5

MPS= /\S / /\Yd
MPS= 1 - MPC

Question 6

Investment function

Answer 6

I= S + (T-G) + (M-X) subject to Interest rates

Question 7

Tax revenue function

Answer 7

T= t(Y)

Question 8

Import function

Answer 8

M= mY

Question 9

Net export function

Answer 9

(X-M)= X - mY

Question 10

5 Autonomous components of AE

Answer 10

Autonomous consumption
Investment
Government spending
Tax rate
Exports

Question 11

3 Induced components of AE

Answer 11

Consumption
MPC
Total tax revenue