2 - AD - C+S Flashcards
(8 cards)
1
Q
Factors influencing consumption
A
- income
- wealth effect
- consumer confidence
- job security
- interest rates
- demography (growing population spending more)
2
Q
Benefits of rising consumption
A
- rising AD
- faster SR growth
- less spare capacity
- falling unemployment
-increased business confidence to invest
3
Q
Costs of rising consumption
A
- inflation pressure
- current account deficit
- unbalanced growth
- more household debt
- bad for environment
4
Q
How to calculate savings
A
Total household savings / total household disposable income
5
Q
Importance of saving for an economy
A
- savings flow into financial markets and businesses can use these to invest
- provide households with stability
6
Q
Paradox of thrift
A
Theory that states that an increase in saving can lead to a decrease in economic activity and a decrease in overall saving
7
Q
How to calculate MPC
A
Change in C / change in Y
8
Q
Calculate MPS
A
Change in S / change in Y
