Value Added Equals the Value of Output Minus the Value

question 200

True/False

Value added equals the value of output minus the value of intermediate products and services bought from other businesses.

Calculate induced consumption from given levels of disposable income.

Define and explain autonomous consumption.

Calculate savings for given levels of disposable income.

Understand and calculate the Average Propensity to Save (APS) and the Average Propensity to Consume (APC).

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Definitions:

Absolute Purchasing Power Parity

A theory that suggests that in the absence of trade barriers and transportation costs, identical goods will have the same price in different countries when prices are expressed in a common currency.

Covered Interest Arbitrage

A financial strategy to profit from the difference in interest rates between two countries while hedging against exchange rate risks.

Spot Rate

The current market price at which a particular asset, such as a currency, commodity, or security, can be bought or sold for immediate delivery.

Relative Purchasing Power Parity

Relative Purchasing Power Parity (RPPP) is an economic theory which postulates that the rate at which the exchange rate between two currencies will change over time is equivalent to the rate at which their purchasing power converges, essentially due to inflation rates differences.