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Below is an essay on "economics" from Anti Essays, your source for research papers, essays, and term paper examples.

“Aggregate Demand and Equilibrium Income”

Consumer: The Driving Force of Aggregate Demand

• Consumption – the total value of all newly produced goods and services purchased by households except for new houses. (Consumer Expenditure)

Consumption Schedule

• Disposable Income – the sum of all the incomes minus taxes plus transfer payments.

o Transfer Payments – payments paid by government as grants to certain individuals.

• Consumption Schedule – relationship between real disposable income and real consumption expenditure.

Autonomous Consumption

• Autonomous Consumption – the part of consumption that does not vary with disposable income.

Marginal Propensity to Consume

• Marginal Propensity to Consume – the fraction of each added dollar of real disposable income that goes to added consumption.

o Average Propensity to Consume – ratio of real consumption expenditure to real disposable income.

*Short Run vs. Long Run

o Consumption spending tends to rise over long periods by about $0.90 for every $1 increase in disposable income. (Long Run).
o People tend to change their consumption by less that $0.90 for every $1 change in income. (Short Run – year or less).

Movement Along and Shifts in the Consumption Schedule

• Wealth – total value of all assets that a household owns.

• Price Level – change in the price level can affect the real purchasing power of nominal money balances.

o A rise in price level means that a $20 bill in a checking account will buy less than before; a fall in price level means that it will buy more.

• Expectations – any change in consumers’ expectations can cause a shift in the consumption schedule.

• Net Taxes – taxes minus transfer payments.

• Autonomous Net Taxes – taxes of transfer payments that do not vary with the level of domestic income.

• Marginal Tax Rate – the percentage of each added dollar of real domestic income that must be paid in taxes.


• Investment – total...

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"economics". Anti Essays. 19 Feb. 2019


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economics. Anti Essays. Retrieved February 19, 2019, from the World Wide Web: https://www.antiessays.com/free-essays/Economics-34731.html