Macroeconomics

Play an AI-generated podcast conversation about this lesson

Which equation represents the relationship between income, Marginal Propensity to Consume (MPC), and Marginal Propensity to Save (MPS)?

MPC = Change in Consumption / Change in Income

K = 1 / MPS

Y = MPC + MPS (correct)

Effect in Economy = Y x K

What is the formula for the multiplier coefficient (K)?

K = 1 / Y

K = 1 / (1-MPC) (correct)

K = 1 / MPS

K = 1 / (1+MPC)

If a person has an MPC of 80%, what is the multiplier coefficient (K)?

K = 1 / (1+0.8)

K = 1 / (1+80%)

K = 1 / (1-0.8)

K = 1 / (1-80%) (correct)

What is the effect in the economy if a person with a P100 income per day has a multiplier coefficient (K) of 5?

Effect in Economy = P100 x 5 Signup and view all the answers

What is the interpretation of the multiplier effect in the given example?

The income flow circulates and generates income for others Signup and view all the answers

What happens to the P80 income that is consumed in the given example?

It is generated into income for others by the same amount Signup and view all the answers

What is the total aggregate income in the economy resulting from the process in the given example?

P500 Signup and view all the answers

What is the formula for calculating MPC?

MPC = Change in Consumption / Change in Income Signup and view all the answers

What is the formula for calculating MPS?

MPS = 1 - MPC Signup and view all the answers

What is the formula for calculating the effect in the economy?

Effect in Economy = Y x K Signup and view all the answers

According to the text, what is the purpose of macroeconomics?

To explain how a nation can optimally use its resources Signup and view all the answers

What does the Production Possibilities Frontier (PPC) represent?

The outcome or production combination that can be produced with a given amount of resources Signup and view all the answers

What are the conditions represented by the PPC?

Full capacity or full employment, underemployed, unattainable production Signup and view all the answers

How can the impossible production be attained?

Increase capital goods, improve technology Signup and view all the answers

What is consumption in macroeconomics?

Expenditures made by households on goods and services Signup and view all the answers

What does the multiplier effect or coefficient denote?

The phenomenon whereby some initial increase or decrease in the rate of spending will bring about a more than proportionate increase or decrease in national income Signup and view all the answers

What are the two disagreements over how a country should achieve optimum wealth?

A great amount of government involvement, a minimal or limited amount of government involvement Signup and view all the answers

What is the role of the producer in the production of goods and services?

To transform entrepreneurs into final goods and services Signup and view all the answers

What is the role of the consumer in spending and savings?

To satisfy the needs and wants of individuals Signup and view all the answers

What are the problems to solve in macroeconomics?

Role of the producer in the production of goods and services and getting profit, role of consumer in spending and savings Signup and view all the answers