Macroeconomics Chapter: Consumption and Investment

The relationship between changes in income and changes in consumption. It measures how much consumption spending increases for every extra dollar of income.

The relationship between changes in income and changes in saving. It measures how much saving increases for every extra dollar of income.

The sum of MPC and MPS always equals 1. This reflects that any additional income is either spent or saved.

The total expenditure on final goods and services in an economy. It includes consumption spending, investment spending, government spending, and net exports.

The total amount of goods and services that firms are willing to supply at a given price level.

The level of AD that results in an equilibrium in the goods market, where the quantity demanded equals the quantity supplied.

The relationship between the level of income and consumption spending. It shows how much people spend on consumption goods at different income levels.

The portion of consumption expenditure that is independent of income. It represents the minimum level of spending, even when income is zero.

The relationship between income and consumption, showing how much people spend as their income changes.

The portion of income that is not spent on consumption, representing money saved.

The point where the total demand for goods and services (AD) equals the total supply (AS), determining the level of economic output and employment.

The amount of consumption expenditure even when income is zero, indicating spending from past savings or borrowing.

Investment that occurs regardless of income levels, typically driven by the government.

The relationship between a change in spending and the resulting change in overall income, amplifying the initial impact.

A situation where all available resources in an economy are employed, with no involuntary unemployment.

The proportion of total income spent on consumption. Calculated by dividing total consumption (C) by total income (Y): APC = C/Y

The proportion of total income saved. Calculated by dividing total saving (S) by total income (Y): APS = S/Y.

A situation where people are willing and able to work at the prevailing wage rate but cannot find jobs.

The relationship between the level of aggregate demand (AD) and aggregate supply (AS). The economy is at equilibrium when AD equals AS.

The ratio of the change in income (∆Y) to the change in investment (∆I). It measures the extent to which an initial change in investment impacts overall economic activity.

The level of income at which planned aggregate expenditure equals planned aggregate output. It is the point where the aggregate demand curve intersects the 45-degree line.

The relationship between the planned level of investment and the rate of interest. It shows the inverse relationship between investment and interest rates.

The addition to the stock of capital goods, such as structures, equipment, or inventory.

The maximum possible value of the investment multiplier, representing an infinitely large impact of investment on national income.

The relationship between saving and income. It shows how much is saved at different income levels.

Savings can be negative when consumption exceeds income. This is often seen at low income levels.

The increase in national income due to a change in investment is calculated by multiplying the change in investment by the multiplier, which is 1/(1-MPC).

The level of national income where planned aggregate expenditure equals total output produced. It's the point where there's no unplanned inventory accumulation or depletion.

The total amount of money spent by households on goods and services.

The total amount of money households save. It's the part of disposable income that's not spent.