Module 13 - Macoreconomics And Government Policy

Question 1

Income

Answer 1

Income (Y) = Savings (S) + Consumption (C)

Question 2

Consumption

Answer 2

a + bY

a = autonomous consumption (amount needed to spend on basics to survive)

b = marginal propensity to consume (spend on goods and services) (will be between 0 - 1)

Y = income

Question 3

What is MPS?

Answer 3

Marginal propensity to save

The proportion of an increase in income that an individual would save

Question 4

MPS

Answer 4

1 - MPC

Question 5

Increase in national income

/

Increase in aggregate demand

Answer 5

Injection x (1/MPS)

1/MPS is defined as the multiplier

Question 6

Aggregate demand

Answer 6

C + I + G + X - M

Consumer spending + investment + government spending + exports - imports