Consumption and Saving Functions

An increase in disposable income will result in an increase in the level of saving, and vice versa.

The saving function can be derived from a consumption function because S ≡ Y - C.

When Y = C, then S = 0, which is the break-even income where households consume their entire income.

<p>APC is the fraction or percentage of total income that is consumed.</p> Signup and view all the answers

<p>APC + APS = 1, indicating that households either consume or save their total income.</p> Signup and view all the answers

<p>MPS is the fraction or proportion of any change in income that is saved.</p> Signup and view all the answers

<p>The size of the MPC and the multiplier are directly related.</p> Signup and view all the answers

<p>1 / (1 - b)</p> Signup and view all the answers

<p>A small change in investment plans or consumption-saving plans can trigger a much larger change in the equilibrium level of GDP and income.</p> Signup and view all the answers

<p>Disposable income (Yd) is equal to total income (Y) since there are no taxes.</p> Signup and view all the answers

<p>Y = (a + I) / (1 - b)</p> Signup and view all the answers

<p>The amount by which equilibrium GDP will increase/decrease whenever investment expenditure increases by one unit.</p> Signup and view all the answers

<p>The assumption is that AE = C + I, and AE = GDP.</p> Signup and view all the answers

<p>There is underproduction, UI &lt; 0, and firms increase production, increasing output, employment, and income.</p> Signup and view all the answers

<p>There is overproduction, UI &gt; 0, and firms reduce production, decreasing output, employment, and income.</p> Signup and view all the answers

<p>The equilibrium level of output will increase, and AE will increase to AE = C + I + G.</p> Signup and view all the answers

<p>Consumption and saving will fall at each level of GDP because consumption now depends on disposable income (Yd) instead of total income (Y).</p> Signup and view all the answers

<p>The increase in taxes will decrease consumption spending, resulting in a decrease in AE.</p> Signup and view all the answers

<p>Irregular innovations that influence both investment and consumption spending, thus output, employment and the price level.</p> Signup and view all the answers

<p>It increases the incentive to invest, thus output, employment and income increase.</p> Signup and view all the answers

<p>Output, employment and prices decline.</p> Signup and view all the answers

<p>Unemployment rate = (Number of unemployed people / Labour Force) * 100.</p> Signup and view all the answers

<p>The total number of economically active people (15 years and above) who are willing and able to work.</p> Signup and view all the answers

<p>A situation where people are able, available and willing to find work and actively seeking work, but not employed.</p> Signup and view all the answers

<p>To narrow down the gap between people searching for jobs and firms that are looking for workers.</p> Signup and view all the answers

<p>Changes in the structure of demand for labour.</p> Signup and view all the answers

<p>The introduction of automatic teller machines reducing the number of job opportunities for bank tellers.</p> Signup and view all the answers

<p>Through the growth of highly competitive industries in other regions, destroying jobs in similar industries in industrial countries.</p> Signup and view all the answers

<p>Jobs are lost in the industries that produce the goods or services that are no longer in demand.</p> Signup and view all the answers

<p>A decline in certain industries, such as the textile industry.</p> Signup and view all the answers