How macroeconomy works

Question 1

What is disposable income

Answer 1

Amount of money an individual or household has available for spending + saving after direct taxes

Question 2

Aggregate demand is…

Answer 2

Aggregate demand is the total spending on goods and services in an economy over a period of time

Question 3

Levels of consumer spending affected by…

Answer 3

MPC - Marginal Propensity to consume
MPS - Marginal Propensity to save
APC - Average Propensity to consume
APS - Total proportion of income saved
Consumer confidence
Interests rates and supply of credit
Distribution of income
Actual changes in the economy (e.g. house prices)

Question 4

MPC

Answer 4

MPC - Marginal Propensity to consume

Amount of an increase in earnings that is spent

Question 5

MPS

Answer 5

MPS - Marginal Propensity to save

The amount of increase in earnings that is saved

Question 6

APC

Answer 6

APC - Average Propensity to consume

Total proportion of income spent (consumption divided by income)

Question 7

APS

Answer 7

APS - Total proportion of income saved

Total proportion of income saved

Question 8

Discretionary spending is…

Answer 8

Money spent by consumers on things other than necessities things such as food, clothes and fuel

Question 9

What does ceteris paribus mean

Answer 9

All other things being equal