Aggregate Demand and Government Stabilization

Autonomous consumption and consumption dependent on income

It varies across individuals based on their income levels

Expectations significantly affect autonomous consumption

<p>The slope is equal to the marginal propensity to consume</p> Signup and view all the answers

<p>Poor households have credit constraints</p> Signup and view all the answers

<p>They maintain stable consumption regardless of income changes</p> Signup and view all the answers

<p>The marginal propensity to consume (MPC) is less than 1.</p> Signup and view all the answers

<p>Government spending, taxation, and imports.</p> Signup and view all the answers

<p>Fall in investment leads to a fall in AD, which causes lower output and income.</p> Signup and view all the answers

<p>A fall in expected earnings.</p> Signup and view all the answers

<p>Higher tax rate lowers the multiplier effect.</p> Signup and view all the answers

<p>Domestic income and marginal propensity to import.</p> Signup and view all the answers