MACROECONOMICS >C< W/MYECONLAB
18th Edition
ISBN: 9781323886038
Author: Pearson
Publisher: Pearson Custom Publishing
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Question
Chapter 8, Problem 1.1P
To determine
The relationship between MPC and MPS and
Expert Solution & Answer
Explanation of Solution
Option (a):
MPC is the marginal propensity to consume which represents that portion of change in income that is consumed or spent.
Option (b):
MPS is the marginal propensity to save which represents that portion of change in income that is saved.
Option (c):
Aggregate output refers to the total quantity of goods and services produced over a given period of time in an economy.
Option (d):
Aggregate income refers to the total amount received by all factors of production in a given time period.
The relationship between MPC and MPS can be established as follows:
Since all the income is either consumed (spent) or saved;
The relationship between aggregate output and aggregate income is that both are actually the same thing viewed from different points.
Economics Concept Introduction
Concept introduction:
Marginal propensity to consume (MPC): Marginal propensity to consume refers to the sensitivity of change in the consumption level due to the changes occurred in the income level.
Marginal propensity to save (MPS): The ratio of change in saving when there is a change in disposable income.
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Students have asked these similar questions
What is the difference between aggregate expenditure and aggregate demand? Why is the aggregate demand curve downward sloping while the aggregate expenditure line is upward sloping?
1. Answer the following:
A) In 2011 the United States economy had a GDP of $14,991 billion according to the United
Nations. If consumption was $10,729 billion, government spending was $2,594 billion, and net exports was -$568 billion, how much was investment spending?
B) In 2011 the United States economy had a GDI (Gross Domestic Income) of approximately $13,548 billion according to the Bureau of Economic Analysis. If wages were $8,340 billion, interest payments were $516 billion, and rent was $430 billion, approximately how much was remaining for profit?
Briefly define the following terms and explain the relationshipbetween them:MPC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . MultiplierActual investment . . . . . . . . . . . . . . . . . . . . . Planned investmentAggregate expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . Real GDPAggregate output . . . . . . . . . . . . . . . . . . . . . . . Aggregate income
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