ECON 101 Chapter Notes - Chapter 10: Real Interest Rate, Fiscal Multiplier, Demand Curve
Document Summary
Income consumption and saving: consumption and saving, primarily determined by di, direct relationship, consumption schedule, planned household spending (in our model, saving schedule, di minus c, dissaving can occur. Average propensities: average propensity to consume (apc, fraction of total income consumed, average propensity to save (aps, fraction of total income saved. Marginal propensities: marginal propensity to consume (mpc, proportion of a change in income consumed, marginal propensity to save (mps, proportion of a change in income saved. Non-income determinants: amount of disposable income is the main determinant, other determinants, wealth, borrowing, expectations, real interest rates. Other important considerations: switching to real gdp, changes along schedules, simultaneous shifts, taxation, stability. Interest-rate-investment relationship: expected rate of return, the real interest rate, investment demand curve. Shifts of investment demand: acquisition, maintenance, and operating costs, business taxes, technological change, stock of capital goods on hand, planned inventory changes, expectations. Instability of investment: variability of expectations, durability, irregularity of innovation, variability of profits.