Chapter 8 – Basic Macro Economic Relationships Flashcards
45° line
A reference line bisects the 90° angle formed by the two axes, and a long which consumption equals disposable income.
Personal saving
The personal income of households less personal taxes and personal consumption expenditures; disposable income not spent for consumer goods.
Consumption schedule
Schedule showing the amounts household plan to spend for consumer goods at different levels of disposable income.
Saving schedule
A schedule that shows the amount households plan to save a different levels of disposable income.
Dissaving
Spending for consumer goods and services in excess of disposable income; the amount by which personal consumption expenditures exceed disposable income.
Break even income
The level of disposable income at which household plan to consume all the income and to save none of it.
Average propensity to consume or APC
The fraction of disposable income that house was planning to spend for consumer goods and services.
Average propensity to save APS
The fraction of disposable income that household save.
Marginal propensity to consume or MPC
The fraction of any change in disposable income spend for consumer goods.
Marginal propensity to save or MPS
The fraction of any change in disposable income that household safe.
Wealth effect
A downward shift of the savings schedule and an upward shift of the consumption schedule due to higher asset wealth.
Rate of return
The game in net revenue divided by the cost of an investment or an R&D expenditure; expressed as a percentage.
Expected rate of return
The increase in profit affirm anticipates it will obtain by purchasing capital.
Investment demand curve
A curve that shows the amount of investment demanded by and economy of a series of real interest rates.
Gross private domestic investment
Expenditures for newly produced capital goods such as machinery, equipment, tools and buildings and for additions to inventories.
