Multiplier model Flashcards
1
Q
What is the formula for the consumption function
A
Aggregate consumption = autonomous consumption (C0) + consumption dependant on income (C1xY)
2
Q
What is marginal propensity to consume?
A
The change in consumption when disposable income changes by one unit.
3
Q
aggregate demand formula?
A
Consumption + investmentment. the consumption function starts higher but the I intersection is still at a 45 degree angle.
AD= C0+C1Y +I
4
Q
Goods market equilibrium?
A
the point is intersection between aggregate demand and output (income).
