The document discusses aggregate demand and consumption. It defines consumption as the spending on consumer goods and services over a period of time. Consumption is influenced by factors like income, wealth, inflation, interest rates, availability of credit, and expectations. The marginal propensity to consume measures the change in consumption from a change in income. The average propensity to consume is the average amount spent on consumption out of total income.
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This is a suggested answer to an exam-style question (for AS macro) on whether the Bank of England should start to raise interest rates to help sustain the UK economic recovery.
Macroeconomics two concepts are explained briefly in this slide. Consumption and Investment function and related concepts viz., multiplier, accelerator and business cycles
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The Roman Empire, a vast and enduring power, stands as one of history's most remarkable civilizations, leaving an indelible imprint on the world. It emerged from the Roman Republic, transitioning into an imperial powerhouse under the leadership of Augustus Caesar in 27 BCE. This transformation marked the beginning of an era defined by unprecedented territorial expansion, architectural marvels, and profound cultural influence.
The empire's roots lie in the city of Rome, founded, according to legend, by Romulus in 753 BCE. Over centuries, Rome evolved from a small settlement to a formidable republic, characterized by a complex political system with elected officials and checks on power. However, internal strife, class conflicts, and military ambitions paved the way for the end of the Republic. Julius Caesarās dictatorship and subsequent assassination in 44 BCE created a power vacuum, leading to a civil war. Octavian, later Augustus, emerged victorious, heralding the Roman Empireās birth.
Under Augustus, the empire experienced the Pax Romana, a 200-year period of relative peace and stability. Augustus reformed the military, established efficient administrative systems, and initiated grand construction projects. The empire's borders expanded, encompassing territories from Britain to Egypt and from Spain to the Euphrates. Roman legions, renowned for their discipline and engineering prowess, secured and maintained these vast territories, building roads, fortifications, and cities that facilitated control and integration.
The Roman Empireās society was hierarchical, with a rigid class system. At the top were the patricians, wealthy elites who held significant political power. Below them were the plebeians, free citizens with limited political influence, and the vast numbers of slaves who formed the backbone of the economy. The family unit was central, governed by the paterfamilias, the male head who held absolute authority.
Culturally, the Romans were eclectic, absorbing and adapting elements from the civilizations they encountered, particularly the Greeks. Roman art, literature, and philosophy reflected this synthesis, creating a rich cultural tapestry. Latin, the Roman language, became the lingua franca of the Western world, influencing numerous modern languages.
Roman architecture and engineering achievements were monumental. They perfected the arch, vault, and dome, constructing enduring structures like the Colosseum, Pantheon, and aqueducts. These engineering marvels not only showcased Roman ingenuity but also served practical purposes, from public entertainment to water supply.
Operation āBlue Starā is the only event in the history of Independent India where the state went into war with its own people. Even after about 40 years it is not clear if it was culmination of states anger over people of the region, a political game of power or start of dictatorial chapter in the democratic setup.
The people of Punjab felt alienated from main stream due to denial of their just demands during a long democratic struggle since independence. As it happen all over the word, it led to militant struggle with great loss of lives of military, police and civilian personnel. Killing of Indira Gandhi and massacre of innocent Sikhs in Delhi and other India cities was also associated with this movement.
1. What's the equation for
aggregate demand?
Aggregate Demand (AD) =
? + ? + ? + (? - ?)
On your mini whiteboardsā¦ā¦
2. What's the equation for
aggregate demand?
Aggregate Demand (AD) =
C + I + G + (X-M)
3.
4. Lesson Objectives:
1) You will all show understanding for what consumption
entails.
2) You should be to identify what influences consumption.
3) You could choose consumption as an evaluative tool in
relation to AD.
5. Consumption is ā¦..
ļµPut these words in the correct order to
define consumption.
time. on the of period
and a consumer spending
goods over services
L.O 1) You will all show understanding for what consumption entails.
6. Consumption is ā¦..
ļµThe spending on consumer
goods and services over a
period of time.
L.O 1) You will all show understanding for what consumption entails.
7. Consumption is SPENDING on
ā¦
ļµGoods
ļµServices
ļµDurable goods
ļµNon ā durable
goods
L.O 1) You will all show understanding for what consumption entails.
8. Consumption is SPENDING on
ā¦
ļµGoods
ļµServices
ļµDurable goods
ļµNon ā durable
goods
HaircutChocolate
bar
Washing
powder
Car
T.V
L.O 1) You will all show understanding for what consumption entails.
9. The consumption function
ļµ There are a number of factors that determine how much a household consumes.
ļµ Consumption & these factors = the consumption function
ļµ Most important factor ā disposable income.
L.O. 2: You should be to identify what influences consumption.
Factors influencing
consumption
10. The consumption function
ļµ There are a number of factors that determine how much a household consumes.
L.O. 2: You should be to identify what influences consumption.
Factors influencing
consumption
Income
Wealth
- Physical (houses, cars, furniture)
- Monetary (cash, money in bank,
stocks, shares, pensions)
Inflation
Interest rates
Availability of creditExpectations
Composition of households
11. Disposable Income
ļµ Most important factor ā disposable income.
L.O.3: You could choose consumption as an evaluative tool in relation to AD.
Example:
Suzie earns Ā£1000 a month in 2014, due to 2015 salary increases at her company she earns
Ā£1200 a month. Economic theory predicts that the consumption of her household will rise.
But ā how much will it rise? This measurement is the Marginal propensity to consume (MPC).
12. Marginal Propensity to Consume
L.O. 3:You could choose consumption as an evaluative tool in relation to AD.
Example: Suzie earns Ā£1000 a month in 2014, due to 2015 salary increases at her company she
earns Ā£1200 a month.
Marginal propensity to consume (MPC) = change in consumption
-------------------------------------
change in income
If the Ā£200 rise in income leads to Ā£150 rise in consumption:
MPC = 150
-------- = 0.75
200
For the economy as a whole the MPC is likely to be positive but less than 1.
13. Marginal Propensity to Consume
L.O.3: You could choose consumption as an evaluative tool in relation to AD.
Question 1:
Bob earns Ā£2000 a month in 2014, due to 2015 salary increases at his company he earns Ā£2500 a month.
Question 2
Harry earns Ā£550 a month, he has a salary increase of Ā£100.
Question 3
Penny and Ken have a combined income of Ā£3000 a month, Ken has a pay increase of Ā£400 a month.
Question 4
Hardeep earns 10% more a month on an average income from his market stall of Ā£1500.
Ā£100 not spent in all cases.
14. Average Propensity to Consume
APC measures the average amount spent on consumption out of total income.
Example: if total disposable income (y) in an economy were Ā£100 billion and consumption (c) were Ā£90 billion
then APC would be ā
90
---- = 0.9
100
In a developed economy APC is likely to be less than 1 because consumers will also save part of their earnings.
15. To summarise ā consumption so farā¦
On your post it note write ā¦
1) Define consumption
2) The factors that influence it
3) MPC
4) APC
Try to complete without looking at notesā¦.
