Chapter 8: Basic Macroeconomic RelationshipsThis is a featured page

The Income Consumption / Income Saving Relationship
  • The consumption, saving schedule.
  • Average and marginal propensities to save/consume.
    • APC=consumption/income
    • APS=savings/income
    • MPC=change in consumption/change in income
    • MPS= change in savings/change in income
  • Nonincome determinants of consumption and saving.
    • wealth
    • expectations
    • real interest rates
    • household debt

The Interest Rate - Investment Relationship
  • Expected rate of return.
  • The real interest rate.
  • Investment demand curve.
  • Shifts of the investment demand curve.
    • Acquisition, maintenance and operating costs
    • business taxes
    • technological change
    • stock of capital goods on hand
    • expectations

The Multiplier Effect
  • Explanation
  • Rationale
  • The multiplier and marginal propensities.



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