Gross Domestic Product : It is defined as the money value of all finished goods and services that are produced by the normal resident and nonresident of the country inside the boundary of a country usually for one year. The formula to calculate change in GDP is, Here, is autonomous spending. MPC is marginal propensity to consume. Marginal Propensity to Consume ( MPC ): It is defined as the change which occurs in total consumption level due to change in income. The formula to calculate MPC is Here, is change in income. is change in consumption level. MPC is marginal propensity to consume. Multiplier: It is defined as the ratio of total change in gross domestic product due to change in the autonomous spending. The formula to calculate multiplier is, Here, MPC is marginal propensity to consume. Aggregate Consumption Level ( C ): It is defined as the consumption of whole economy The formula to calculate change in aggregate spending is, Here, is change in consumption. is change in income. MPC is marginal propensity to consume. Consumption Function: It shows how the change in disposable income of an individual changes the consumption level. The formula to calculate consumption function is, Here, C is consumption level. is autonomous consumption. is disposable income MPC is marginal propensity to consume. Planned Aggregate Spending: It is the summation of consumption level in an economy and the planned investment. The formula to calculate planned aggregate spending is, Here, C is consumption level. is the planned investment spending. AE is the planned aggregate spending.

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Chapter 11, Problem 12P

To determine

Concept Introduction:

Gross Domestic Product: It is defined as the money value of all finished goods and services that are produced by the normal resident and nonresident of the country inside the boundary of a country usually for one year.

The formula to calculate change in GDP is,

Here,

is autonomous spending.

MPC is marginal propensity to consume.

Marginal Propensity to Consume ( MPC ): It is defined as the change which occurs in total consumption level due to change in income.

The formula to calculate MPC is

Here,

is change in income.

is change in consumption level.

MPC is marginal propensity to consume.

Multiplier: It is defined as the ratio of total change in gross domestic product due to change in the autonomous spending.

The formula to calculate multiplier is,

Here,

MPC is marginal propensity to consume.

Aggregate Consumption Level ( C ): It is defined as the consumption of whole economy

The formula to calculate change in aggregate spending is,

Here,

is change in consumption.

is change in income.

MPC is marginal propensity to consume.

Consumption Function: It shows how the change in disposable income of an individual changes the consumption level.

The formula to calculate consumption function is,

Here,

C is consumption level.

is autonomous consumption.

is disposable income

MPC is marginal propensity to consume.

Planned Aggregate Spending: It is the summation of consumption level in an economy and the planned investment.

The formula to calculate planned aggregate spending is,

Here,
C is consumption level.

is the planned investment spending.

AE is the planned aggregate spending.

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