Flashcards in Chapter 10 Deck (12):
The classical view held that a market economy _______ regulate itself to avoid periods of excessive unemployment
Can regulate itself
Who would be most likely to say that "people do not always save more as the interest rate rises"
Keynes believed that saving is more responsive to changes in ________ than to changes in interest rates
The ratio of the change in consumption to the change in disposable income is called the
Marginal propensity to consume
The MPC + MPS is equal to
What does the term Co refer to?
The larger the marginal propensity to save the smaller the ______ and the smaller change in ___________, given in autonomous consumption
Multiplier, change in Real GDP
Formula for multiplier
1 / 1 - MPC
A change in autonomous spending will change Real GDP more if the aggregate supply curve is ________ than if it is _______
Horizontal, upward sloping
(Horizontal AS curve is the full capacity of productions)
The classical economist believed ____________ determined savings, while Keynes said it was __________
Interest rate ; income
What shifts the AD?