ECON 2010 Chapter : Ch 8 Notes

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azuremammoth471

15 Mar 2019

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8: saving, capital information, and financial markets: savings and wealth: Saving- current income minus spending on current needs. Assets- anything owned that has value (ex: old car is less of an asset than a new one) Balance sheet- list of economic unit"s assets and liabilities. Assets on the left side, liabilities on the right side: flow and stock values: Flow is a value per unit in time. Stock is a value at a point in time. *the flow of savings causes the stock of wealth to change; flow is like a mortgage, it is paid by the month. Each week money comes in, you add to stock of your assets. Ex: you pull 1000 out of your savings account to buy a car, assets go down, rate of savings most likely stays the same: capital gains and losses. Wealth changes when the value of your assets change. Capital gains- increase the value of existing assets.

Related Questions

True or False Questions:

1. Recessionary Expenditure Gap- Aggregate expenditures by which aggregate expenditures at the full employment GDP falls short of those required to achieve full employment GDP.

2. Private Closed Economy- An economy that includes consumer, business, and government segments of the economy.

3. Lump-sum taxes- A tax of a constant amount so the government obtains the same amount of tax at each level of GDP.

4. Aggregate Supply schedule- A relationship between a nation's price level and the amount of real domestic output that is produced.

5. Real Rate of Interest effect- The Nominal Rate of Interest earned on a project.

6. Savings- savings are planned investments by the consumer.

7. Wealth effect- The dollar amount of all the assets owned minus the dollar amount of all the liabilities or debt.

8. Savings Schedule - GDP less investment = savings

9. Aggregate Demand Schedule- a schedule that shows the amount of a nation's output (real GDP) that buyers desire to purchase at each price level.

10. Productivity- The measure of the level of the nation of real output and the amount of resources used to produce the output, less labor cost.

11. Multiplier effect- Measures the change in GDP to spending.

12. Injection- Investment by private business into the economy for capital goods is and injection into the economy.

13. Consumption schedule- The measurement of Disposable income less savings.

ceruleanotter437

The average propensity to consume (APC) equals

the change in real disposable income divided by the change in consumption expenditures.

the change in consumption expenditures divided by the change in real disposable income.

real disposable income divided by consumption expenditures.

consumption expenditures divided by real disposable income.

The consumption function shows how much

households plan to consume per year at each level of real disposable income.

households plan to consume per year at each level of savings.

households plan to consume per year at each possible interest rate.

real disposable income people will earn at each income tax bracket.

Saving is

the accumulation of past periods of savings while savings is the amount of disposable income that is not consumed in a given period of time.

the amount one does not consume in a given period of time while savings is the accumulation of past periods of saving.

the difference between disposable income and spending on goods and services while savings is the difference between real GDP and disposable income.

the difference between real GDP and disposable income while savings is the difference between disposable income and consumption spending.

Thinking as an economist would, which is true of investment?

		Investment represents spending on capital goods.
		Investment is a stock concept.
		Investment is putting money into stocks and bonds.
		It is the portion of disposable income that is not used for consumption or saving.

An appreciation of the U.S. dollar ________ the price of U.S. imports, and ________ the price of U.S. exports.

		lowers, lowers
		increases, increases
		increases, lowers
		lowers, increases

QUESTION 33

Other things being equal, if input prices rise in a country, then there would be

		cost-push inflation.
		demand-pull inflation.
		cost-push deflation.
		more production and a lower price level.

mauvetortoise195

A consumer is making saving plans for this year and next. She knows that her real income after taxes will be $50,000 in both years. Any part of her income saved this year will earn a real interest rate of 10% between this year and next year. Currently, the consumer has no wealth (no money in the bank or other financial assets, and no debts). There is no uncertainty about the future.

The consumer wants to save an amount this year that will allow her to (1) make college tuition payments next year equal to $12,600 in real terms; (2) enjoy exactly the same amount of consumption this year and next year, not counting tuition payments as part of next year's consumption; and (3) have neither asserts nor debts at the end of next year.

a. How much should the consumer save this year? How much should she consume? How are the amounts that the consumer should save and consume affected by each of the following changes (taken one at a time, with other variables held at their original values)?

b. Her current income rises from $50,000 to $54,200.

c. The income she expects to receive next year rises from $50,000 to $54,200.

d. During the current year she receives an inheritance of $1050 (an increase in wealth, not income).

e. The expected tuition payment for next year rises from $12,600 to $14,700.

f. The real interest rate rises form 10% to 25%.

ECON 2010 Chapter : Ch 8 Notes

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