question
Rule of 70
answer
The amount of time it takes for GDP to double given APR (70/APR) = time it will take for gdp to double
question
Savings (S)
answer
= DI - C
question
Disposable income
answer
the most significant factor affecting consumption
question
45 degree line
answer
Equality of what is on the x and y axis, shows the relationship between DI and C and S
question
Consumption Schedule
answer
How households would plan to save, relationship for disposable income and consumption: households tend to spend more when they have smaller income rather than larger
question
Savings Schedule
answer
As disposable income increases, savings increase
question
Breakeven
answer
DI = C
question
APC
answer
Consumption/Income
question
APS
answer
Savings/Income
question
MPS
answer
Δ savings / Δ income
question
MPC
answer
Δ consumption / Δ income
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Factors that affect consumption
answer
Wealth, borrowing, expectations, real interest rates
question
How does real interest rates affect investments?
answer
If the real interest rate + rate of return is less than investment, you lose money.
question
Other factors that can affect investment
answer
Acquisition, maintenance, operating costs
Business Taxes
Technological change
Stock of capital goods
planned inventory changes
expectations
Business Taxes
Technological change
Stock of capital goods
planned inventory changes
expectations
question
Variability of investment
answer
Variability of expectations, durability, irregularity of innovation, variability of profits
question
Multiplier
answer
Δ in real GDP/ initial change in spending
question
Multiplier in terms of MPC
answer
( 1/ 1 - MPC)
question
Multiplier in terms of MPS
answer
(1/MPS)
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