Exam 30: Basic Macroeconomic Relationships

The saving schedule is drawn on the assumption that as income increases,

Assume that MPS is 0.4.If spending increases by $8 billion, then real GDP will increase by

The economic performance in the Great Recession of 2007-2009 clearly illustrated the relationship that if interest rates fall, then investment spending will increase.

The value of the multiplier is likely to fall if there is a fall in

1 + MPS = MPC.

If households see the value of their financial assets increase significantly, then the saving schedule will shift upward.

The investment demand curve will shift to the right as a result of

The consumption schedule shows the relationship of household consumption to the level of

The slope of the consumption schedule is measured by the MPC.

If the real interest rate increases,

(Consider This) During the Great Recession of 2007-2009, both real interest rates and investment spending declined.This suggests that

A decline in disposable income

If a $100 billion increase in consumption spending creates $100 billion of new income in the first round of the multiplier process and $75 billion in the second round, the multiplier in the economy is 4.

An increase in disposable income

A change in the amount saved due to a change in income is represented by a

In a closed private economy, income is $50 billion and consumption is $40 billion.When income rises by 10 percent, consumption rises by 9 percent.The MPS over the relevant income range is

The relationship between consumption and disposable income is such that

Economists widely agree that the value of the real-world multiplier is 2.5.

The multiplier effect means that

A change in interest rates would shift the consumption schedule and the saving schedule ; a change in taxes would shift these two schedules _.