Summary ECON112: CHAPTER 6: AGGREGATE EXPENDITURES

1) Which spending included hypothetical
types of are in a




private ,
closed economy
?




Consumption ,
Investment


2) 8he amount that ppl spend regardless much
of how income



they earn is
referred to as autonomous spending
3) 8th increase in
spending that results from a
higher income


is
referred to as induced
spending .




4) When does expenditure equilibrium occur
:




↳ when
aggregate expenditure =
national income


•
AE > National income


inventories ¥

•
AE < National income


inventories $ ( surplus )



5) When National income is above equilibrium
Rehe AE
faction below the Y AE line
• =
is


•
Injections are below leakages .

,Aggregate
Expenditures

, Autonomous ( expenditures )
spending
↳ 8ha portion
of total
spending that is

the
independent of level
of income .




↳ is the absolute minimum level
of spending
that occurs .




Induced spending
↳ a
good portion of consumption is induced

by higher income levels .




( MBC )
Marginal propensity to consume


↳ Rehe extra
proportion of consumer
spending that results


from higher income


( MIS )
Marginal propensity to save


↳ the ratio
of the
change in
savings to the


corresponding change in income .




Marginal propensity to expend ( MRE )

↳ Dhe ratio
of change in expenditures that results


from a
change in income .




Wealth
effect
↳ tone direct
effect of a change in wealth on



consumption spending