chapter 8 review macroeconomic measurement & basic concepts
TRANSCRIPT
![Page 1: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/1.jpg)
Chapter 8 Review
Macroeconomic Measurement&
Basic Concepts
![Page 2: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/2.jpg)
With an MPS of .5, the MPC will be:
• 1.0 minus .
![Page 3: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/3.jpg)
The most important determinant of consumption and saving is:
• level of .
![Page 4: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/4.jpg)
As disposable income goes up the
• APC .
![Page 5: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/5.jpg)
Which fiscal policy actions would be most effective in combating a recession
• Taxes . • Government Spending .
![Page 6: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/6.jpg)
The consumption schedule relates:
• consumption to the level of .
![Page 7: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/7.jpg)
The consumption schedule in the diagram indicates that:
• up to a point consumption income, but then falls below income.
![Page 8: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/8.jpg)
APC + APS =
• .
![Page 9: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/9.jpg)
The sector of the economy that is responsible for Consumption is:
• the sector
![Page 10: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/10.jpg)
The relationship between consumption and disposable income is such that:
• a direct and relatively stable relationship exists between and .
![Page 11: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/11.jpg)
If the Government increases Government Purchases by $800 billion dollars and increases taxes by $800 billion dollars the effect on GDP will be
• .
![Page 12: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/12.jpg)
If the marginal propensity to consume is three quarters, then an increase in personal income taxes of $100 will most likely result in
• a decrease in consumption of and a decrease in savings of .
![Page 13: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/13.jpg)
The spending multiplier will have an effect on any new, additional spending in the component(s) of
• and Purchases
![Page 14: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/14.jpg)
• MPC is greater in than in .
![Page 15: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/15.jpg)
If X’s MPC is .70, this means that X will:
• spend of any increase in its disposable income.
![Page 16: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/16.jpg)
Dissaving occurs where:
• consumption income.
![Page 17: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/17.jpg)
The saving schedule is drawn on the assumption that as income increases:
• saving will increase and as a percentage of .
![Page 18: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/18.jpg)
If the marginal propensity to consume is .9, then the marginal propensity to save must be:
• .
![Page 19: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/19.jpg)
The greater is the marginal propensity to consume, :
• The is the marginal propensity to save.
![Page 20: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/20.jpg)
In the late 1990s the U.S. stock market boomed, causing U.S. consumption to rise.
• effect.
![Page 21: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/21.jpg)
The wealth effect is shown graphically as a:
• shift of the consumption schedule.
![Page 22: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/22.jpg)
?/?
Marginal propensity to save (MPS)
=change in saving
change in income
Marginal propensity to consume (MPC)
=change in consumption
change in income
![Page 23: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/23.jpg)
The investment demand slopes downward and to the right because lower real interest rates:
• enable more projects to be undertaken profitably.
![Page 24: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/24.jpg)
An increase in the real rate of interest will
• the level of investment.
![Page 25: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/25.jpg)
The investment demand curve suggests:
• there is an relationship between the real rate of interest and the level of investment spending.
![Page 26: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/26.jpg)
A decrease in corporate income taxes will:
• shift the investment-demand curve to the .
![Page 27: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/27.jpg)
Investment spending in the United States tends to be unstable because:
• profits are highly .
![Page 28: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/28.jpg)
• Capital goods, because their purchases can be postponed like consumer goods, tend to contribute to in investment spending.
![Page 29: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/29.jpg)
The multiplier is:
• 1/ .Or • 1/(1 - )
![Page 30: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/30.jpg)
• Which economy has the highest marginal propensity to consume?
• • Which economy has the largest multiplier?
![Page 31: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/31.jpg)
The practical significance of the multiplier is that it:
• initial changes in spending into larger changes in .
![Page 32: Chapter 8 Review Macroeconomic Measurement & Basic Concepts](https://reader035.vdocuments.mx/reader035/viewer/2022081504/56649ed25503460f94be17ff/html5/thumbnails/32.jpg)
If the MPC is 0.75 and gross investment increases by $8 billion, GDP will increase by
• $ billion.