The AD Curve
This is all another term for all the goods and services (Real GDP) buyers are willing and able to purchase at different price levels
AD
A change in disposable income effects which part of AD?
Consumer Spending
MPC + MPS will always equal ...?
1
What happens to disposable income if there is a tax increase?
Decrease in consumer spending
What is 70 x 3?
210
This is the Formula for AD
C+I+G+(X-M)
Exchange rates impact which part of AD?
Net Exports
This gives economists information on how much people would save rather than consume.
MPS
What is the tax multiplier formula?
-MPC/(1-MPC)
Why is 6 afraid of 7?
Because 7 8 9
If the price level in increasing, what is happening to Real GDP?
Decreases
The price level increases leading interest rates to rise. What happens to AD?
Shifts left
If the MPC is .8 what does this mean?
Out of every dollar a consumer is spending $.80 of it and saving $.20
The MPC is .75.
What is the total change in GDP if the government increases taxes by $200?
-.75/ (1-.75) x 200 = -600
What do vegetarian zombies eat?
Graaaains!
What is it called when the price level increases and lenders need to charge higher interest rates to ger a REAL return on their loans? (This discourages spending and results in lower RGDP)
Interest Rate Effect
The government cuts taxes for its citizens. How does this impact AD?
right shift
Calculate. Someone's disposable income increases by $100 and their consumption goes up $75. What is the MPC?
75/100= .75
(change in consumption/ change in disposable income)
If the federal reserve decreases interest rates, what impact does this have on AD
Increase in C & I
What is Nora's DJ name?
DJ No Requests
What type of relationship exists between the price level and Real GDP?
Inverse
China refuses to purchase American made products. How does this impact AD?
right shift
What is the total change in real GDP if the MPC is .5 and there is $100 billion increase in investment spending?
1/ (1-.5) x 100 = 200 billion
I buy boots. The store owner now has more income to invest in their product. What is this process called where the initial purchase causes multiple increases in aggregate (total) output?
The Multiplier Effect
What is the name of the Texas boots I showed you in class?
Lucchese