Principles of Macroeconomics (12th Edition)
12th Edition
ISBN: 9780134078809
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 8, Problem 1.1P
To determine
The relationship between MPC and MPS and
Expert Solution & Answer
Explanation of Solution
Option (a):
MPC is the marginal propensity to consume which represents that portion of change in income that is consumed or spent.
Option (b):
MPS is the marginal propensity to save which represents that portion of change in income that is saved.
Option (c):
Aggregate output refers to the total quantity of goods and services produced over a given period of time in an economy.
Option (d):
Aggregate income refers to the total amount received by all factors of production in a given time period.
The relationship between MPC and MPS can be established as follows:
Since all the income is either consumed (spent) or saved;
The relationship between aggregate output and aggregate income is that both are actually the same thing viewed from different points.
Economics Concept Introduction
Concept introduction:
Marginal propensity to consume (MPC): Marginal propensity to consume refers to the sensitivity of change in the consumption level due to the changes occurred in the income level.
Marginal propensity to save (MPS): The ratio of change in saving when there is a change in disposable income.
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Students have asked these similar questions
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The following graph plots daily cost curves for a firm operating in the competitive market for sweatbands.
Hint: Once you have positioned the rectangle on the graph, select a point to observe its coordinates.
Profit or Loss0246810121416182050454035302520151050PRICE (Dollars per sweatband)QUANTITY (Thousands of sweatbands per day)MCATCAVC8, 30
In the short run, given a market price equal to $15 per sweatband, the firm should produce a daily quantity of sweatbands.
On the preceding graph, use the blue rectangle (circle symbols) to fill in the area that represents profit or loss of the firm given the market price of $15 and the quantity of production from your previous answer.
Note: In the following question, enter a positive number regardless of whether the firm earns a profit or incurs a loss.
The rectangular area represents a short-run of
thousand per day for the firm.
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Chapter 8 Solutions
Principles of Macroeconomics (12th Edition)
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