4.3.2 - Effect of an Autonomous Change in Aggregate Demand on Income and Output
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Practice Questions
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What is an autonomous change in aggregate demand?
💡 Hint: Think about changes not influenced by economic performance.
What does the term 'excess demand' mean?
💡 Hint: Consider what happens when people want to buy more than what's available.
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Interactive Quizzes
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What happens to equilibrium income when aggregate demand increases?
💡 Hint: Consider how demand changes affect production.
True or False: The Paradox of Thrift suggests that increasing savings always leads to higher total savings.
💡 Hint: Think about individual actions in a collective economic sense.
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Challenge Problems
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Suppose the marginal propensity to consume (MPC) is 0.9, and there is an initial increase in autonomous investment of 20. Calculate the total impact on equilibrium income.
💡 Hint: Focus on the formula for the multiplier effect.
Discuss the potential consequences of a sudden, widespread shift to saving more on consumer spending and overall economic activity.
💡 Hint: Think about how individual decisions collectively shape the economy.
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