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Flashcards in Chapter 10 Deck (12):
1

The classical view held that a market economy _______ regulate itself to avoid periods of excessive unemployment

Can regulate itself

2

Who would be most likely to say that "people do not always save more as the interest rate rises"

John Keynes

3

Keynes believed that saving is more responsive to changes in ________ than to changes in interest rates

Income

4

The ratio of the change in consumption to the change in disposable income is called the

Marginal propensity to consume

5

The MPC + MPS is equal to

1

6

What does the term Co refer to?

Autonomous consumption

7

The larger the marginal propensity to save the smaller the ______ and the smaller change in ___________, given in autonomous consumption

Multiplier, change in Real GDP

8

Formula for multiplier

1 / 1 - MPC

9

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)

10

The classical economist believed ____________ determined savings, while Keynes said it was __________

Interest rate ; income

11

What shifts the AD?

The multiplier

12

According to Keynes, investment is driven by what?

Expectation of prices (income)