Tag: ex ante and ex post

Aggregate Demand refers to the desired level of expenditure in the economy during an accounting year. It is what people wish to spend on the purchase of goods and services during an accounting year.

Saving function is S= s + M(1-b) where s=autonomous savings, (1-b)= marginal propensity to save, and M= income. Comparing it to S=−40+0.4(M), MPS= 0.4.

We know that, 

MPS + MPC = 1 

=> MPC = 1 - MPS 

=> MPC = 1 - 0.4 

=> MPC = 0.6 

Therefore, MPC is 0.6. 

Savings function refers to the standard equation of savings which defines the relationship between savings and income where savings value can be derived at each level with the use of income value. 

S= s + Y(1-b) where s=autonomous savings, (1-b)= marginal propensity to save, and Y= income.

Average Propensity to save defines the amount of savings in every 1 rupee of income for all level of income which can be less than zero at income levels which are lower than the break-even point where savings lies below the x-axis indicating that consumption is greater than income that leads to dissavings in the economy. 

APS refers to Average Propensity to save which defines the amount of savings in every 1 rupee of income for all level of income. It is expressed as the ration of saving to income in an economy. 

Average propensity to save = S/Y where S is the savings and Y is the income in the economy. 

Marginal Propensity to save refers to the percentage change in savings for every one rupee of change in the income. It is the ratio between the change in income and its corresponding change in savings.

Marginal propensity to save = ΔS/ΔY where ΔS is the Change in savings and ΔY is the change in income in the economy. 

APS refers to Average Propensity to save which defines the amount of savings in every 1 rupee of income for all level of income. 

Average propensity to save = S/Y where S is the savings and Y is the income in the economy. 

Savings refers to the proportion which is not utilized at present and is saved for future. It is a function of income where,

Savings refers to the amount of the income which is not spend on the consumption of the commodities. It is the distance between the consumption curve and the income curve after the intersection. 

False.