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Questions and Answers
What are the two components of aggregate consumption mentioned in the text?
What are the two components of aggregate consumption mentioned in the text?
- Fixed and independent of income
- Variable and dependent on savings
- Autonomous and dependent on income (correct)
- Slope and marginal propensity to consume
How does the marginal propensity to consume vary across different households according to the text?
How does the marginal propensity to consume vary across different households according to the text?
- It is constant across all households
- It is large for wealthy households
- It is small for poor households (correct)
- It is dependent on government policies
Which factor is reflected in autonomous consumption according to the text?
Which factor is reflected in autonomous consumption according to the text?
- Government spending decisions
- Current income level
- Credit constraints
- Expectations about future income (correct)
In what way can government spending help stabilize the economy based on the text?
In what way can government spending help stabilize the economy based on the text?
What does the slope of the consumption function represent as per the text?
What does the slope of the consumption function represent as per the text?
How do poor households with credit constraints typically react to changes in current income according to the text?
How do poor households with credit constraints typically react to changes in current income according to the text?
Why is the multiplier greater than one sometimes, as mentioned in the text?
Why is the multiplier greater than one sometimes, as mentioned in the text?
What determines the slope of the Aggregate Demand (AD) line?
What determines the slope of the Aggregate Demand (AD) line?
Which factor is NOT mentioned as influencing Aggregate Investment function in the text?
Which factor is NOT mentioned as influencing Aggregate Investment function in the text?
What are considered as 'leakages' from the circular flow of income according to the text?
What are considered as 'leakages' from the circular flow of income according to the text?
How does a lower interest rate affect investment, as discussed in the text?
How does a lower interest rate affect investment, as discussed in the text?
What is the purpose of adding government to the Aggregate Demand (AD) equation?
What is the purpose of adding government to the Aggregate Demand (AD) equation?
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