Reading Guide: Section 4 Module 16
10 Points due to the longer than usual amount of reading.
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1. Check all of the following that are considered "four simplifying assumptions" in Macroeconomics *
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2. Explain how investment spending will lead to increased income and grow the economy. *
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3. Describe why understanding the marginal propensity to consume is important to understanding changes in the economy. *
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4. Read the "AP Exam Tip". Looking at how investment grows the economy why is the formula important to understand? *
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5. Why does saving money not allow the economy to expand as much? Explain *
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6. Autonomous means *
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7. Why does the size or number of the MPC matter when evaluating economic expansion? *
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8. Taxes and government spending act as *
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9. Income after taxes are paid and government transfers are received is called *
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10. Explain how a consumption function is important to understand for economic policy makers? *
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11. Where did the 2.08 come from in the paragraph above? *
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12. What correlation can be made about disposable income and consumer spending? *
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13. Why would changes in expected future income affect a person's spending today? *
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14. Explain what might cause the consumption function to shift either up or down? *
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15. Why would changes in wealth, not income, increase people's willingness to spend? *
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16. How do consumer and investment spending changes differ? Which is more volatile? *
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17. Why do changes in the interest rate change people's willingness to spend? *
1 point
Go back and read what you just skipped...
18. When firms expect sales to grow rapidly... *
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19. What's the difference between unplanned inventory investment and just regular inventory investment? *
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20. How can unplanned inventory investment occur? *
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21. What happened in the housing market? *
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I know it's late (10:34 PM) but you should still watch this...
Any questions for class other than "why was this mod so long"? I did not write the mods by the way. *
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