BU204_03_Johnson_Jennifer_Unit 6 Homework

Used to construct the aggregate supply curve differs

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used to construct the aggregate supply curve differs from the reasoning used to construct the supply curves for individual goods and services. The supply curve for an individual good is drawn under the assumption that input prices remain constant. As the price of good A rises, sellers' per unit costs of providing good A do not change, and so sellers are willing to supply more of good A-hence, the upward slope of the supply curve for good A.
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Marginal Propensity to Consume “is the increase in consumer spending when disposable income rises by $1”(Krugman & Wells, 2009, p. 289). To me Marginal Propensity to Consume is the extra money that a consumer has to spend on a want or need. For example you receive a bonus with your paycheck, and it's $1000 on top of your normal annual earnings. You suddenly have $500 more in income than you did before. If you decide to spend $400 of this marginal increase in income on a new computer, your marginal propensity to consume will be 0.8 ($400 divided by $500). Multiplier “is the ratio of the total change in real GDP caused by an autonomous change in aggregate spending to the size of that autonomous change” (Krugman & Wells, 2009, p. 290).
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