Macroeconomic Relationships Quiz

Determinants of Consumption and Saving

• Consumption and saving are primarily determined by disposable income, interest rates, and consumer expectations

Relationship Between Disposable Income and Consumption

• There is a direct relationship between disposable income and consumption, as an increase in disposable income leads to an increase in consumption

Effects of Disposable Income on Consumption

• When disposable income is greater than consumption, savings occur, allowing for the accumulation of wealth and potential future investments

Shifts of the Investment Demand Curve

• The investment demand curve is primarily determined by the interest rate, business expectations, and technology, leading to shifts in the curve when these factors change

The Concept of the Multiplier

• The multiplier effect describes the increase in national income resulting from an increase in investment spending, as the initial investment stimulates additional rounds of spending and economic activity