UNIT 3
FORMULAS
Average Propensity to Consume (APC) = consumptionincome
Average Propensity to Save (APS) = saving
income
Marginal Propensity to Consume (MPC) = change in consume
change in income
Marginal Propensity to Save (MPS) = change in saving
change in income
Investment Multiplier = ___1___ or _1__
or Government Spending [1-MPC] MPS
Tax Multiplier = -MPC or _-MPC__
[1-MPC] MPS
Multiplier = __change in Real GDP_
initial change in spending
AGGREGATE DEMAND AND SUPPLY
- Aggregate Demand is a curve that shows the amount of real output that buyers collectively purchase at each possible level.
- There's an inverse relationship between real GDP and Price Level
- Three effects of why the curve is downward sloping
- Interest Rate Effect
- High Price Level- increases in interest rate which discourage investment
- Low Price Level- decreases interest rate which encourages investment
- Real-Balance Effect
- Price Level is High - household and businesses cannot afford to to purchase as much output
- Price Level is Low - households and businesses can afford to purchase more output.
- Foreign-Purchase Effect
- Price Level is High - increase the demand for relatively cheaper imports
- Price Level is Low - increase demand for relatively cheaper U.S. exports
- Shifting AD curve
- a change in Consumption, Investment, Government Spending, or Net Exports
- Multiplier effect that produces a greater change than the original change in the four components
I love how you have simply put the formulas on this post. While it is super simple sometimes adding some detail can help to further explain the formulas and why we need them. Also i would suggest adding the tax multiplier to this post for it too correlates to the subject.
ReplyDeleteThis is a good collection of the formulas we need to calculate consumption and savings. However, it seems to be missing various forms of the Spending Multiplier such as (change of AD) / ( change in spending). I also do not see the Tax Multiplier listed. Also listing what increases in spending, taxes, or disposable income on MPC, MPS, and multipliers would be beneficial.
ReplyDeleteVery simple and easy to understand. Please add the rest of the notes. Also add some information on the Disposable income, the tax multiplier.
ReplyDeleteThis information is very useful it will assist me for my own personal use in note taking and i will use these notes as they will assist me on my test.
ReplyDelete