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Introduction to Macroeconomics > Week 14 content > Flashcards

Week 14 content Flashcards

1
Q

What is aggregate income equal to? (2 things)

A

Aggregate output & Aggregate Expenditure

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2
Q

Formula for Y

A

Y = C + S

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3
Q

Formula for Disposable income

A

Income - Taxes

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4
Q

What is MPC + formula?

A

The extra proportion of income consumed on goods/or services. Change in C/ Change in Y

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5
Q

What is the formula for C?

A

a + bY

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6
Q

Formula for Savings

A

-a + y(1-b)

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7
Q

Formula for APC

A

a/y + b

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8
Q

Formula for APS

A

-a/y + (1-b)

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9
Q

What does APC + APS equal?

A

1

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10
Q

What does MPC + MPS equal??

A

1

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11
Q

Formula for Change in Inventories

A

Productions - Sales

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12
Q

How do business pre-determine future investments?

A

Derived from expectations of the future

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13
Q

Draw the planned investment diagram

A

Check book

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14
Q

When Y>AE, what does this mean?

A

Firms are producing more than is being demanded by households. Unplanned rise in inventory

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15
Q

When Y IS LESS THAN AE

A

Firms are producing less than is being demanded by houses. Unplanned decline in inventory

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16
Q

What determines the rise or decline in inventory?

A

Aggregate expenditure

17
Q

What is the second equilibrium output?

A

Planned investment = planned saving

18
Q

What is autonomous investment dependant on?

A

Expectations on the future

19
Q

What is autonomous consumption dependant on?

A

Consumer confidence

20
Q

If AE increases, what happens to graph?

A

Upward shift, moves left

21
Q

What is the mutliplier?

A

When an increase in AE, consequently leads to an increase in national income

22
Q

What is the knock on effect of an increase in national income?

A

Households generate higher levels of income, this translates into a higher level of spending - adds to surge of the initial stimulus

23
Q

What does an increase in consumption & the size of the multiplier depend on?

A

MPC, higher MPC the greater the increase in consumption & higher MPC results in a larger increase in national income

24
Q

What is the formula for the multiplier? (2)

A

1/1-MPC & 1/MPS

Introduction to Macroeconomics (4 decks)

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