National Income and Price Determination

Disposable income is income after taxes are paid and government transfers are received.

• True

• False

A consumption function shows how a household’s consumer spending varies with the household’s current disposable income.

• True

• False

What MPC stands for?

What is MPC?

The aggregate consumption function shows the relationship between current disposable income and consumer spending for the economy as a whole

• True

• False

What are the two principal causes of shift of the aggregate consumption function?

Investment projects are more attractive at (a)   .

Higher expected future real GDP generates (a)   .

Lower expected future real GDP lowers (a)   .

High current production capacity has (a)   on investment spending because firms don’t yet need to invest in order to increase production.