relationship between disposable income (income-tax) and consumption * C=a+b(Y-T) * a-autonomous spending * b-MPC * Y-Aggregate expenditure * T-net taxes (tY) * Marginal Propensity to Consume (MPC) * Δ consumption/Δ disposable income * Marginal Propensity to Save (MPS) * Δ savings/ Δ DI * DI-MPC=Savings * MPS+MPC=1 * Determinants and Shifts in the Consumption Function * Net Wealth (assets-liabilities) * If Wealth
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with a view of allocating incomes in the best possible way over their entire lifetimes. 2. This implies different marginal propensities to consume out of permanent income‚ transitory income (temporary) and wealth. 3. The basic idea is that individuals will spend the different incomes differently with a view to maintain stable lifestyles i.e. individuals try and consume and save the same amount each year. For example : a person starts working at 20‚ works till 65 and dies at 80. Annual
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result will be a prolonged period of a. high unemployment. b. production above potential GDP. c. shortages in supply. d. inflation whenever supply increases. Figure 10-8 6. The slope of the consumption function is measured by the marginal propensity to save. 7. If the stock market falls by 25 percent next year and remains down‚ what is most likely to happen to the consumption function? a. It will shift downward. b. It will shift upward. c. It will not shift‚ but people will move upward
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DESIGN OF QUESTION PAPER ECONOMICS Class – XII Marks – 100 1. Duration – 3 hrs. Weightage by type of questions Type Number of questions Long answer questions Short answer questions I Short answer questions II Very short answer questions 2. 6 4 3 1 Total Estimated time a candidate is expected to take to answer 36 60 minutes 24 36 minutes 30 50 minutes 10 15 minutes Weightage by content Unit No 1 2 3 4 6 7 8 9 10 3. 6 6 10 10 Mark
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Economics chapter 2 Economics is the efficient allocation of the scarce means of production toward the satisfaction of human wants The central fact of economics is scarcity. Human wants are unlimited while resources are limited. Four economics resources: land‚ labor‚ capital and entrepreneurial ability The opportunity cost of any choice is the forgone value of the next best alternative. The production possibilities curve is a hypothetical model of an economy that produces only two products.
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workers with jobs is called A) frictional unemployment. B) structural unemployment. C) cyclical unemployment. D) seasonal unemployment. 8) If consumers purchase fewer of those products that increase most in price and more of those products that decrease in price as compared to the CPI basket‚ then A) changes in the CPI accurately reflect the true rate of inflation. B) changes in the CPI understate the true rate of inflation. C) changes in the CPI overstate the true rate of inflation. D) changes
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demand? Changes in consumer spending‚ investment‚ government spending‚ and net exports will cause AD to shift. If consumer wealth increases‚ expectations become positive‚ household indebtedness decreases‚ or taxes decrease‚ AD will shift to the right (increase). If interest rates decrease or profit expectations increase‚ AD will shift to the right (increase). Profit expectations depend upon things such as expectations on future business expectations‚ technology‚ excess capacity‚ or business
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and vice versa. Income | Consumption | 100 | 185 | 200 | 240 | 300 | 300 | 400 | 365 | 500 | 420 | 600 | 470 | Consumption schedule Changes in the income result to changes in the consumption. It can be measured by taking the Marginal Propensity to Consume (MPC) or the slope of the consumption function. Algebraically‚ it is obtained with this formula: If the consumption is equal to the income‚ then the MPC is equal to one. When the consumption is less than the income‚ the MPC gets less
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Project The Classical Theory Of Employment amd output The fundamental principle of the classical theory is that the economy is self-regulating. Classical economists maintain that the economy is always capable of achieving the natural level of real GDP or output‚ which is the level
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(LRAS). c. the CPI index price level equals the equilibrium wage rate. d. the CPI equals aggregate demand (AD) equals short-run aggregate supply (SRAS) equals long-run aggregate supply (LRAS). ____ 2. Which of the following would cause a decrease in the short-run aggregate supply curve (SRAS)? a. An increase in oil prices. b. An advance in technology. c. An increase in the CPI. d. An increase in the long-run aggregate supply curve (LRAS). Exhibit 10A-1 Aggregate demand and supply
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