This essay will compare the relationship between saving and investment of two schoolers view‚ which is Keynes and Classical economist view. In great depression Keynes argued with classical economist view of relationship between saving and investment. The key theory of Keynes is that the real consumption depends on disposable income. This theory can explain as C = C(Y) In that case consumption (C) and disposable income (Y) are measured in units. The background of this theory is in 1920’s classical
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1. An unplanned increase in inventories results in A) an increase in planned investment. B) a decrease in planned investment. C) actual investment that is greater than planned investment. D) actual investment that is less than planned investment. 2. The ratio of the increase in ________ to the increase in ________ is called the multiplier. A) equilibrium nominal GDP; autonomous expenditure B) equilibrium real GDP; autonomous expenditure C) autonomous expenditure; equilibrium real GDP
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The introduction of credit cards has been a modern method for monitoring and controlling transactions‚ which were previously‚ conducted using cash. “ A credit card is a transaction tool‚ one which gives customers the opportunity and ability at the point of sale to decide whether they want to pay for the purchase over a longer payback period‚ pay it in full or pay a portion of it at the end of the month.” (Jackson‚ 2008) Credit cards have replaced cash in most markets and trading places in the United
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The circular flow model is defined as the flow of resources from households to firms and of products to firms from households. These flows are accompanied by reverse flows of money from firms to households and from households to firms. The circular flow is comprised of the resource market‚ households‚ product market‚ businesses‚ and the government. Macroeconomics - The study of the aggregate (total) Behavior of the whole economy. Macroeconomics Aggregates: - Unemployment rate: Percent of people
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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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Negative impact could be that spending on foreign goods may increase → neg impact on AD as imports increase. Size of multiplier depends on marginal propensity to consume and import. SHOW IMPACT OF MULTIPLIER USING KEYENESIAN CROSS DIAGRAM Size of the Multiplier MPC – marginal propensity to consume – the fraction of extra income that a household consumes rather than saves. E.g. if MPC = ¾ it means that for every extra pound a household earns it speand ¾’s and saves ¼ of it. Multiplier =
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Question- 01: What was the historical background of the school? Answer: The Keynesian school‚ proponents of the branch of economics now termed as Keynesian economics had come into existence towards the beginning of the twentieth century. This school was arguably the first viable alternative to the Classical school of thought. The school argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and therefore advocates active policy responses by the public sector
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ECON 248 Assignment 2 1. The bank rate is the interest rate at which the Bank of Canada stands ready to lend reserves to chartered banks. The banker ’s deposit rate is the interest rate that the Bank of Canada pays banks on their deposits at the Bank of Canada. Changes to these rates by the Bank of Canada typically spread to other interest rates and therefore will influence the amount of lending done by the banks. An open market operation is the purchase or sale of government securities‚ which
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decrease in taxes‚ ceteris paribus‚ will shift the demand curve rightward pushing the economy out of recession. With a decrease in taxes‚ an increase in disposable income(Yd) occurs‚ which in turn increases both consumers marginal propensity to consume and marginal propensity to save. An increase of MPC means more money is being spent in the economy increasing the demand for goods and services. An increase in consumption(C)‚ investment(I)‚ government spending(G)‚ and net exports(Nx) will raise
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Aggegate Implications of Microeconomic Consumption Behaviou’‚ American Economic Review‚ Papers and Proceedings‚ [24] Carroll‚ C. D. (2000c) ‘ ‘Risky Habits’ and the Marginal Propensity to Consume Out of Permanent Income’‚ International Economic Journal‚ 14‚ pp [25] Carroll‚ C. D. (2001a)‚ ‘Precautionary Saving and the Marginal Propensity to Consume Out of Permanent Income’‚ NBER Working Paper Number W8233. [26] Carroll‚ C. D. (2001b)‚ ‘A Theory of the Consumption Function‚ With and Without Liquidity Constraints’
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