week 4

Question 1

national expenditure (E) equation

Answer 1

AD = E = C + I + G + X – M
= Cd + I + G+ X
= Cd + J

Question 2

national income (Y) equation

Answer 2

Y = Cd + W
where W= S + T + M

Question 3

consumption function

Answer 3

function of national income

Question 4

mpc- marginal propensity to consume

Answer 4

= change C / change Y

Question 5

is consumption more or less responsive in LR

Answer 5

Consumption is more responsive to a change in income in the long run.

Question 6

withdrawals (endogenously determined)

Answer 6

savings are a function of your income
mps= derivatives of savings/derivative of income

Question 7

net taxes

Answer 7

taxes function of national income
rate of taxes
mpt- marginal propensity of taxation = change net taxes/change income

Question 8

imports

Answer 8

mpm= derivative of import (M)/ derivative income

Question 9

withdrawals

Answer 9

mpw= change withdrawals/ change income

Question 10

injections (exogenously determined)

Answer 10

doesn’t change when national income and demand change in a year

Question 11

equilibrium national income

Answer 11

withdrawals equal injections

Question 12

national income rise

Answer 12

when injections exceed withdrawals
vice versa for national income to fall

Question 13

the multiplier

Answer 13

withdrawal and injection approach
change y/change J