Income and Spending - Custom Scholars
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# Income and Spending

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Aggregate Demand
the amount of goods and services in the economy that will be purchased at all possible price levels
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aggregate demand equation
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What is equilibrium?
when quantity of output produced=quantity demanded
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Equilibrium

Y= C+I+G+NX
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consumption function
the relationship between consumption spending and disposable income.

Consumption demand increases with the level of income.
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consumption function relation to level of Income
Y^=C^
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c bar
Represents the level of consumption when income is zero.
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slope of consumption function
MPC
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c=cbar+cY
consumption function
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small c
small c is the mpc
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c(bar)
autonomous consumption means the income level is zero
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small c / MPC function
MPC= change C/ Change Y
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consumption function = autonomous consumption
c= c bar because

when the income is zero c=c bar+(0)y.
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C change / Y change
for every dollar increase in income the level of consumption rises by C.
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MPC (marginal propensity to consume)
The MPC is the increase in consumption per unit increase in income.
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Income that is not spent on consumption is saved
s=y-c
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budget constraint
the limit on the consumption bundles that a consumer can afford

S=Y-C
1 of 17
question
Aggregate Demand
the amount of goods and services in the economy that will be purchased at all possible price levels
question
aggregate demand equation
question
What is equilibrium?
when quantity of output produced=quantity demanded
question
Equilibrium

Y= C+I+G+NX
question
consumption function
the relationship between consumption spending and disposable income.

Consumption demand increases with the level of income.
question
consumption function relation to level of Income
Y^=C^
question
c bar
Represents the level of consumption when income is zero.
question
slope of consumption function
MPC
question
c=cbar+cY
consumption function
question
small c
small c is the mpc
question
c(bar)
autonomous consumption means the income level is zero
question
small c / MPC function
MPC= change C/ Change Y
question
consumption function = autonomous consumption
c= c bar because

when the income is zero c=c bar+(0)y.
question
C change / Y change
for every dollar increase in income the level of consumption rises by C.
question
MPC (marginal propensity to consume)
The MPC is the increase in consumption per unit increase in income.
question
Income that is not spent on consumption is saved
s=y-c
question
budget constraint
the limit on the consumption bundles that a consumer can afford

S=Y-C

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