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ECON CH 10.
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Gravity
Models and Fiscal Policy
Terms in this set (72)
aggregate
total or combined accumulation
personal savings
"not spending" or "that part of disposable (after-tax) income not consumed"
Savings (S)
equals disposable income (DI) minus consumption (C)
S= DI-C
saving schedule
A table of numbers that shows the amounts households plan to save (plan not to spend for consumer goods), at different levels of disposable income.
liquidating
the act of converting something into cash (selling for cash)
break-even income
The level of disposable income at which households plan to consume (spend) all their income and to save none of it.
Average Propensity to Consume (APC)
Fraction (or percentage) of disposable income that households plan to spend for consumer goods and services; consumption divided by disposable income.
Average Propensity to Save (APS)
Fraction (or percentage) of disposable income that households save; saving divided by disposable income.
APC
The fraction or percentage pf total income that its consumed. Average Propensity to Consume
APS
The fraction of the total income that is saved. Average Propensity to Save
Marginal Propensity to Consume (MPC)
The fraction of any change in disposable income spent for consumer goods; equal to the change in consumption divided by the change in disposable income
MPC
The proportion, or fraction, of any change in income consumed. Marginal Propensity to Consume
Marginal Propensity to Save (MPS)
The fraction of any change in disposable income that households save; equal to the change in saving divided by the change in disposable income.
MPS
the fraction of any change in income saved
What is the MPC?
the numerical value of the slope of the consumption schedule
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Verified questions
ECONOMICS
The United States has shifted to an economy driven by service industries. The primary sector, which deals in natural resources, and the secondary sector, which produces goods, are both shrinking. Do you think the shift toward a service economy is helping American workers or hurting them? Give reasons for your answer.
ECONOMICS
In the past, schools in Los Angeles County have closed an average of three days each year for weather emergencies. What is the probability that schools in Los Angeles County will close for four days next year?
ECONOMICS
Karen Kay, a portfolio manager at Collins Asset Management, is using the capital asset pricing model for making recommendations to her clients. Her research department has developed the information shown in the following exhibit. Forecasted Returns, Standard Deviations, and Betas. $$ \begin{matrix} \text{ } & \text{Forecasted Return} & \text{Standard Deviation} & \text{Beta}\\ \text{Stock X} & \text{14.0\\%} & \text{36\\%} & \text{0.8}\\ \text{Stock Y} & \text{17.0} & \text{25} & \text{1.5}\\ \text{Market index} & \text{14.0} & \text{15} & \text{1.0}\\ \text{Risk-free rate} & \text{5.0} & \text{ } & \text{ }\\ \end{matrix} $$ a. Calculate expected return and alpha for each stock. b. Identify and justify which stock would be more appropriate for an investor who wants to: i. Add this stock to a well-diversified equity portfolio. ii. Hold this stock as a single-stock portfolio.
ECONOMICS
Maria's parents told her that for ten years prior to her high school graduation, they saved $200 per month for her college education--$24,000 (plus interest). Which function of money does this example best illustrate? Why?
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