Chapter 10 ~Y(GDP) = C(consumption) + Ig(gross investment) + G(government purchases) + Xn (Net exports) GDP Equation is an “Identity If household only sector GDP=Y=C ~DI(disposable income)= C(consume)+S(save) DI is either income that households will consume or save] DI has a direct relationship with C & S (- value saving= dissaving, 0 value=breakeven) ~Consumption function (Relationship between total consumer expenditure(y) & total disposable income(x) the two are linear dependent) (C= f(DI)) If linear y=a+bx or C=a+b(DI) (a & b constants for slope and y-intercept) Consumption Schedule[direct relationship between aggregate consumption and aggregate income][Most important determinant of c & s is level of income] ~Marginal Propensity to Consume(MPC)=∆C/∆DI also the slope of consumption function [Proportion of a change in income consumed][MPC greater than 0 less than 1(assumed value)] ~Marginal Propensity to Save(MPS)=∆saving/∆income MPC+MPS=1 [Proportion of a change in income saved][MPC+MPS=APC+APS] [MPS&MPC constant as income changes] ~Average Propensity to Consume(APC)=consumption/income [Fraction of total income consumed] ~Average Propensity to Save(APS)=saving/income [Fraction of total income saved] APC+APS=1 [APC & APS variable as income changes]
~Nonincome determinants [other determinants and shifts in income schedule] wealth^ consumption^, burrowing more^ consumption^, Expectations of higher prices tomorrow consumption^ today, Real interest rates Interest Rates down Consumption^]
~Multiplier Effect-[Multiplier and MPC directly related: Large MPC=Larger increases in spending][Multiplier and MPS inversely related: Large MPS= Smaller increases in spending][Multiplier= 1/1-MPC = 1/MPS]
Chapter 11 ~Aggregate Expenditure Model[ Prices are fixed, Private closed economy- households and businesses, AE=GDP when plan investment = savings][GDP=DI=C+I] [Saving=y-c, AE=C+I, +-=y-AE]
~Adding International Trade [Include IT in AE, Private open economy, Exports create production, employment & income][Subtract spending on imports, Xn can be + or -] ~International Linkages [Prosperity abroad=^US
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dominated by majestic mountains such as Chartreuse, Belledonne and Vercors, provides the ideal location for those who enjoy the outdoors. There is also easy access to Switzerland, Italy and the French Riviera, making Grenoble a marvelous place in which to study abroad. All-inclusive Program Fee French Language and Culture Program $13,495 With Optional AIFS Flight Package from $14,895 (see page 111) Intensive French Language Program $13,495 With Optional AIFS Flight Package from $14,915 (see page 111)…
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