Unit 3 Review

Autonomous Expenditure

Money spent on things regardless of how much income you generate (fixed costs)

MPS

Marginal Propensity to Save

MPC

Marginal Propensity to Consume

Yd

Disposable Income

Equation for Yd

Gross income - Income Tax

Equation for MPC

Change in Consumption / Change in Yd

Equation for MPS

Change in Savings / Change in Yd

The Expenditure Multiplier

Maximum effect a change in autonomous expenditure has on aggregate demand

Equation for Expenditure Multiplier

1 / MPS

Equation for Tax Multiplier

- MPC / MPS

Equation for Transfer Multiplier

MPC / MPS