Figure 15.4 -Refer to Figure 15.4. Suppose That the Economy Is Originally

question 79

Multiple Choice

Figure 15.4

-Refer to Figure 15.4. Suppose that the economy is originally in equilibrium at point a. In the long run, as the supply of money increases, the economy moves to point

• A) a.
• B) b.
• C) c.
• D) d.

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Definitions:

Saving

The portion of income not spent on consumption or taxes, typically put aside for future use or investment.

APC

The acronym for Average Propensity to Consume, which measures the fraction of income that households spend on goods and services rather than saving.

Disposable Income

The cash pile households can utilize for their spending and savings needs after income taxes are handled.

MPC

Marginal Propensity to Consume, which represents the ratio of change in consumer spending to a change in household income.