tailieunhanh - Lecture Economics (18th edition): Chapter 27 - McConnell, Brue, Flynn's

Chapter 27 - Basic macroeconomic relationships. The goal is for you to learn: Describe how changes in income affect consumption (and saving), list and explain factors other than income that can affect consumption, explain how changes in real interest rates affect investment, identify and explain factors other than the real interest rate that can affect investment, illustrate how changes in investment increase or decrease real GDP by a multiple amount. | Basic Macroeconomic Relationships Chapter 27 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives Effect of changes in income on consumption (and saving) Other factors that affect consumption Effect of changes in real interest rates on investment Other factors that affect investment Changes in investment have a multiplier effect on real GDP 27- Basic Relationships Income and consumption Income and saving Disposable income (DI) 45°line for reference C = DI on the Line S = DI - C 27- Income and Consumption Consumption (billions of dollars) Disposable Income (billions of dollars) 45° Reference Line C=DI 83 86 85 84 88 89 91 90 87 92 93 94 95 01 97 96 99 98 00 02 05 03 04 Consumption In 1992 Saving In 1992 45° C Source: Bureau of Economic Analysis 27- Consumption and Saving The consumption schedule The saving schedule Break-even income Average propensity to consume (APC) Average propensity to save (APS) APS = Saving Income APC = Consumption Income 27- Consumption and Saving Marginal propensity to consume (MPC) Marginal propensity to save (MPS) MPC = Change in Consumption Change in Income MPS = Change in Saving Change in Income 27- Consumption and Saving (1) Level of Output And Income (GDP=DI) (2) Consump- tion (C) (3) Saving (S) (1) – (2) (4) Average Propensity to Consume (APC) (2)/(1) (5) Average Propensity to Save (APS) (3)/(1) (6) Marginal Propensity to Consume (MPC) Δ(2)/Δ(1) (7) Marginal Propensity to Save (MPS) Δ(3)/Δ(1) $370 390 410 430 450 470 490 510 530 550 $375 390 405 420 435 450 465 480 495 510 $-5 0 5 10 15 20 25 30 35 40 .99 .98 .97 .96 .95 .94 .93 .93 .00 .01 .02 .03 .04 .05 .06 .07 .07 .75 .75 .75 .75 .75 .75 .75 .75 .75 .25 .25 .25 .25 .25 .25 .25 .25 .25 MPC + MPS = 1 MPC and MPS measure slopes 27- 500 475 450 425 400 375 45° Consumption and Saving 50 25 0 390 410 430 450 470 490 510 530 550 390 410 430 450 470 490 510 530 550 C S Consumption Schedule . | Basic Macroeconomic Relationships Chapter 27 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives Effect of changes in income on consumption (and saving) Other factors that affect consumption Effect of changes in real interest rates on investment Other factors that affect investment Changes in investment have a multiplier effect on real GDP 27- Basic Relationships Income and consumption Income and saving Disposable income (DI) 45°line for reference C = DI on the Line S = DI - C 27- Income and Consumption Consumption (billions of dollars) Disposable Income (billions of dollars) 45° Reference Line C=DI 83 86 85 84 88 89 91 90 87 92 93 94 95 01 97 96 99 98 00 02 05 03 04 Consumption In 1992 Saving In 1992 45° C Source: Bureau of Economic Analysis 27- Consumption and Saving The consumption schedule The saving schedule Break-even income Average propensity to consume (APC) Average propensity to save (APS) APS = Saving .