Chapter 9 - Aggregate Expenditures

Question 1

Income & Consumption

Answer 1

DI and income rise parallely. DI is always slightly higher, B/C the gap between the two is savings.

Question 2

Consumption Function

Answer 2

Relationship between consumption and income

Question 3

Marginal Propensity to Consume (MPC)

Answer 3

The fraction of a change in income that is spent on consumption.
Change in consumption/change in income

Question 4

Marginal Propensity to Save (MPS)

Answer 4

The fraction of a change in income that is saved.

Change in saving/change in income

Question 5

MPS+MPC

Answer 5

Always=1

Question 6

Saving Function

Answer 6

relationship between saving & income

Question 7

Net wealth

Answer 7

assets-liabilities

Question 8

Consumption function shifts down b/c

Answer 8

decrease in net wealth
increase in PL
increase in interest rate
bad change in consumer expectation

Question 9

Consumption function shifts up b/c

Answer 9

increase in net wealth
decrease in PL
decrease in interest rate
good change in consumer expectation

Question 10

Investment demand curve

Answer 10

relationship between investment and nominal interest rate

Question 11

Investment Function

Answer 11

relationship between the amount businesses plan to invest and the economy’s income.

Question 12

autonomous

Answer 12

independent

Question 13

Investment & Disposable income

Answer 13

shifts up or down, is straight line, and is autonomous of income

Question 14

Government Purchase Function

Answer 14

relationship between government purchases and economy’s income

Question 15

What is independent of income

Answer 15

government purchases, net taxes, investment, and (x-m)

Question 16

Aggregate expenditure

Answer 16

Consumption+Investment+government purchases+Net exports