Chapter 10 - How the macroeconomy works

Question 1

When is the economy at equilibrium

Answer 1

AD = AS

Question 2

What is formula of AD

Answer 2

AD = C + I + G (X-M)

Question 3

Factors that influence consumption

Answer 3

Wealth, Income, Tax, Expected income, Consumer confidence, Interest rates

Question 4

Formula for personal savings ratio

Answer 4

Personal savings = reduced or actual personal saving/ personal disposable income

Question 5

Formula for multiplier effect

Answer 5

1/(1-MPC)

Question 6

The 3 withdrawals and their injections

Answer 6

Investment - saving
Government spending - taxes
Exports - imports

Question 7

Difference between accelerator theory of investment and multiplier

Answer 7

Accelerator = investment increases when income increases

Multiplier = A component of AD increasing would lead to a larger increase in national income

Question 8

On the circular flow model what goes into households

Answer 8

Rent
Wages
Interest
Profit

Goods/services

Question 9

On the circular flow model what goes into firms

Answer 9

Land
Labour
Capital
Enterprise

Consumer spending

Question 10

When is an economy at equilibrium

Answer 10

When demand meets supply