Essays Flashcards

1
Q

Interest rates diagram

A

Leftward shift
Keynesian LRAS
pl decrease

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2
Q

Interest rates analysis:

A
  • Incentive to save increases
  • cost of borrowing increases
  • consumer expenditure decreases
  • MPS increases
  • MPC decreases
  • decrease in investment
  • riskiness of losing on capital increase
  • consumer expenditure & investment are components of AD.
  • leftward shift in demand
  • price leek decreases
  • decrease in real GDP
  • new macroeconomic equilibrium
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3
Q

Disposable income intro

A

The average disposable income can be defined as the total personal income minus total person current taxes divided by population size.

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4
Q

Diagram - disposable income

A

Keynesian diagram

Increase in demand.

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5
Q

Disposable income analysis

A
  • increased incentive for consumer spending on domestically produced goods and services.
  • increase in consumer expenditure
  • MPC > 0
  • MPS
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6
Q

Interest rates introduction

A

Aggregate demand is the total demand for a country’s goods and services at a given price level and in a given time period. Aggregate supply is the total amount that producers in an economy are willing and able to supply at a given price level in a given time period.

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7
Q

Evaluation interest rates

A
  • the level of spare capacity
  • other components of AD
  • incentive for MPS/MPC
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