Savings and Investment
The relationship between Savings and Investment.
What is Savings = Investment?
The relationship between MPC and MPS.
What is 1 - MPC = MPS?
The cost of a bakery that has to frequently update and print new price lists to keep up with rapidly changing prices.
What is menu costs?
The three supply curve shifters.
What are commodity prices, nominal wages, and productivity?
An increase in expected future inflation drives up
the nominal interest rate, leaving the expected real interest rate unchanged.
What is the Fisher Effect?
The consumption function.
What is C = a + MPC x YD
The formula for GDP per Capita.
What is Real GDP/Population?
The aggregate demand curve shifters.
What are changes in Commodity Prices, changes in Nominal Wages, and Changes in Productivity?
Increased government borrowing raises interest rates, reducing private investment.
What is crowding out?
Unplanned changes in inventories that occur
when actual sales are more or less than businesses expected
What is unplanned inventory investment?
The three sources of economic growth.
What is physical capital, human capital, and technology?
Nominal wages that are slow to fall even in the face of high unemployment and slow to rise even in the face of labor shortages.
What are sticky wages?
A country has a trade deficit of $25 million, meaning it imports more than it exports.
What is Net Capital Inflow?
The three factors that shift aggregate consumption.
What is changes in aggregate wealth, changes in expected future income, Change in the size of the existing stock of physical capital, Fiscal Policy, and Monetary Policy?
This type of capital: An engineer takes an advanced course on sustainable architecture.
What is human capital?
Potential output is the level of real GDP the economy
would produce if all prices, including nominal wages, were fully flexible.
What is the long-run aggregate supply curve?
In 2025, the country of Investopia experienced several international financial transactions. Foreign investors purchased $250 billion worth of Investopian government bonds, and foreign companies built new factories in Investopia valued at $70 billion. At the same time, Investopian firms invested $180 billion abroad. Calculate Net Capital Inflows.
Net Capital Inflow=Capital Inflows−Capital Outflows
Net Capital Inflow=320−180=140
C=500+0.8YD
If disposable income is $2,000 billion, calculate the consumption.
C=500+0.8(2,000)
C=500+1,600=2,100
The country of Florania has a total GDP of $850,000 million in 2025. Its total population is 25 million people. Calculate the GDP per Capita.
Real GDP/Population = 850,000/25 = 34,000
The relationship between the Fisher effect and Aggregate demand.
What is when people expect higher inflation, nominal interest rates rise to maintain the same real return?