Edevv Flashcards
Who is John Maynard Keynes?
John Maynard Keynes (1883-1946) was a British economist known as the founder of Keynesian economics and the father of modern macroeconomics.
What is the relationship between income and consumption?
As income grows, disposable income rises, leading consumers to buy more goods, resulting in increased consumption of major purchases and non-essential goods.
What defines the consumption schedule?
The difference between income and consumption defines the consumption schedule.
What is the formula for savings?
Savings (S) = Disposable Income (DI) - Consumption (C).
What does the Consumption Function (CF) reflect?
The Consumption Function reflects the direct consumption-disposable income relationship based on historical data.
What is the average propensity to consume (APC)?
The average propensity to consume is the proportion of consumption to income, which falls as income increases.
What is the difference between average propensity to consume and marginal propensity to consume?
Average propensity to consume is the ratio of total consumption to total income, while marginal propensity to consume is the increase in consumption from an increase in income.
What is the formula for marginal propensity to consume (MPC)?
MPC = change in consumption / change in income.
What does the marginal propensity to save (MPS) represent?
MPS is the fraction of an increase in income that is not spent and is instead saved.
What are non-income determinants of consumption and saving?
Non-income determinants include wealth, expectations about future prices and income, taxation, and household debt.
How do expectations affect consumption and saving?
Expectations of rising prices increase consumption and decrease saving, while expectations of a recession decrease consumption and increase saving.
How does taxation influence consumption and saving?
Increased taxes lead to less saving and consumption, while tax reductions encourage more spending and saving.
What is the effect of household debt on consumption?
Increased borrowing raises current consumption, while decreased borrowing reduces consumption.
