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Flashcards in National Income Determination Deck (23):
0

What is the most important element in determining how much consumption there is in our economy

Income

1

What is the marginal propensity to consume

The proportion of each extra dollar earned that is actually spent on consumption

2

How do you calculate the MPC

Change in consumption over the change in disposable income

3

What is the marginal propensity to safe

The proportion of each extra dollar earned that is actually saved for later use

4

How do you calculate the MPS

Change in saving divided by the change in income

5

What do the MPC in MPS always add up to

One

6

What is disposable income

Money after taxes and transfer payments

7

What is national income

Wages rent interest profits

8

What are considered the injections

Consumption
Investment
Government
Exports
Transfer payments

9

What are considered the leakages

Savings
Imports
Taxes

10

The determinants of consumption in order of importance

Changes in wealth
Taxes
Interest-rate changes
Price level changes
Expectations

11

Where is real interest rate set?

In the financial market

12

What type of money is investment done on?

Borrowed money

13

What is real interest rate?

The cost of borrowing

14

What does real interest rate tell us

If an investment will be profitable

15

What kind of slope does investment demand for money have?

Downward sloping

16

What is elasticity?

To the extent at which something stretches

17

What are the non-interest investment determinates

Current economic growth
Expectations
Technology
Tax regulatory environment

18

What are the net exports determinants

National income between nations
Relative prices between nations
Currency exchange rates

19

Describe the national income between nations

If national income goes up so does imports making net exports go down

If national income goes down so does imports making net exports go up

20

What is a strong dollar

Means that when the dollars traded you get more foreign currency
Makes the net exports go down

21

What is a weak dollar

Means when the dollars traded you get less foreign currency
Makes net exports go up

22

Everything else remaining equal

Cetaris Paribus