Principal of economics key formals for chapter 10 and 12

Consumption spending

Consumption spending

= (Income-break even) • MPC + break even

Savings =

Income- consumption spending

Money multipler

1/1-MPC or 1/MPS

Expected rate of return=

Increased in profit- cost/ Cost • 100 ( similar to New-old/old•100)

Real interest rate =

Nominal interest rates - inflation

MPC + MPS =

1

MPS=

Saving2-saving1/disposal income2- disposal income1 (s2-s1/Di2-Di1)

APS + APC=

1

APS

Savings/ Disposable income ( S/DI)

APC

consumption/ disposable income (C/ DI)