Download presentation

Presentation is loading. Please wait.

Published byKayleigh Vardy Modified over 3 years ago

1
Consumption Math Problems Warm-Up/Review What are the three spending sectors? Which one makes up the most of the GDP? Use the dictionary to define the following: Propensity Average Marginal Disposable Income

2
Consumption Problems Average Propensity to Consume (APC) Average Propensity to Save (APS) =Demonstrates households tendencies Marginal Propensity to Consume (MPC) Marginal Propensity to Save (MPS) =Demonstrates change in households behavior when DI changes Multiplier (M) New GDP

3
Average Propensity to Consume (APC) Definition: how much a person spends on average Formula: = Consumption Disposable Income Example: If C=$20,000 and DI=$30,000, find the APC.

4
Average Propensity to Save (APS) Definition: how much a person saves on average Formula: = Savings Disposable Income Example: If S=$10,000 and DI=$30,000, find the APS.

5
Marginal Propensity to Consume (MPC) Definition: the change in consumption when income changes Formula: = Change in Consumption Change in DI Example: Change in C is $30,000 and change in DI is $40,000 Find the MPC

6
Marginal Propensity to Save (MPS) Definition: the change in savings when income changes Formula: = Change in Savings Change in DI Example: Change in S is $10,000 and change in DI is $40,000 Find the MPS

7
Multiplier Definition: the # of times money is turned over (all spending generated by one dollar would add up to 4 or 5 times that dollar) Affect on economy: Expands the money supply! Formula: = 1 MPS Example: What’s the Multiplier when MPS is o.2

8
New GDP Definition: the change in GDP given the Multiplier and spending Formula: =Initial GDP + (Multiplier x Change in Spending) Example: What is New GDP when initial GDP is $9000, the Multiplier is 5 and Investment spending falls by 50? ************************

9
Wrap-Up: Answer the following questions in your own words What does APC & APS tell us about people’s behavior and how the economy is doing? What does MPC & MPS tell us about people’s behavior and how the economy is doing? Why is it important to take the multiplier into account? Why must we calculate New GDP?

Similar presentations

OK

Basic Macroeconomic Relationships 10 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Basic Macroeconomic Relationships 10 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

© 2018 SlidePlayer.com Inc.

All rights reserved.

Ads by Google

Ppt on complex numbers class 11th accounts Ppt on rainwater harvesting techniques Free download ppt on brain machine interface Ppt on service oriented architecture youtube Free ppt on reflection of light Download ppt on mergers and acquisitions Ppt on 14 principles of henri fayol unity Ppt on limits and continuity examples Ppt on construction of 3 phase induction motor Ppt on bond length and energy