the level of income
The most important determinant of consumer spending is
change in income that is spent
The MPC can be defined as that fraction of a
decreases consumption by moving downward along a specific consumption schedule
A decline in disposable income
the MPC is constant and the APC declines as income rises
The consumption schedule is such that
greater than zero, but less than one
The size of the MPC is assumed to be
and saving both increase
As disposable income increases, consumption
a decrease in disposable income
Which one of the following will cause a movement down along an economy's consumption schedule
spend eight-tenths of any increase in his disposable income
If Trent's MPC is .80, this means that he will
consumption exceeds income
Dissaving occurs where
.1
If the marginal propensity to consume is .9, then the marginal propensity to save must be
MPS must be constant
If the saving schedule is a straight line, the
MPC and APC at each income level have both increased
Suppose an economy's consumption schedule shifts from C1 to C2 as shown in the above diagram. We can say that its
.80
Refer to the above data. The marginal propensity to consume is
.10
Refer to the above data. At the $100 level of income, the average propensity to save is
investment demand schedule
The relationship between the real interest rate and investment is shown by the
expected rate of return on capital goods and the real interest rate
The immediate determinants of investment spending are the
the percentage increase in purchasing power that the lender receives on a loan
The real interest rate is
12 percent
If the nominal interest rate is 18 percent and the real interest rate is 6 percent, the inflation rate is
high nominal interest rate
A high rate of inflation is likely to cause a
change in GDP resulting from a change in spending
The multiplier is useful in determining the
change in GDP/initial change in spending
The multiplier is defined as
can be found by taking the reciprocal of the MPS
The multiplier
magnifies initial changes in spending into larger changes in GDP
The practical significance of the multiplier is that it
2.5
If the MPC is .6, the multiplier will be
2
The Council of Economic Advisers has estimated that the actual multiplier for the U.S. economy is approximately