1. How do the marginal propensity to consume (MPC) and the average propensity to consume (APC) differ? How does the MPC differ from the MPS? Why must the sum of marginal propensity to consume (MPC) and the MPS equal 1?
2. Is the relationship between changes in spending and changes in real GDP in the multiplier effect a direct (positive) relationship or is it an inverse (negative) relationship? How does the size of the multiplier relate to the size of the marginal propensity to consume (MPC)? The MPS? What is the logic of the multiplier-marginal propensity to consume (MPC) relationship?
3. What are the variables (the items measured on the axes) in a graph of the (a) consumption schedule and (b) saving schedule? Are the variables inversely (negatively) related or are they directly (positively) related? What is the fundamental reason that the levels of consumption and saving in the United States are each higher today than they were a decade ago?
4. Suppose that disposable income, consumption, and saving in some country are $200 billion, $150 billion, and $50 billion, respectively. Next, assume that disposable income increases by $20 billion, consumption rises by $18 billion and saving goes up by $2 billion. What is the economy's MPC? Its Marginal propensity to save (MPS)? What was the APC before the increase in disposable income? After the increase?
5. In what direction will each of the following occurrences shift the investment demand curve, other things equal?

• An increase in unused production capacity occurs.
• Business taxes decline.
• The costs of acquiring equipment fall.
• Widespread pessimism arises about future business conditions and sales revenues.
• A major new technological breakthrough creates prospects for a wide range of profitable new products.

6.How is it possible for investment spending to increase even in a period in which the real interest rate rises?

7.Why is investment spending unstable?

8.Is the relationship between changes in spending and changes in real GDP in the multiplier effect a direction (positive) relationship or is it an inverse (negative) relation- ship?

9.How does the size of the multiplier relate to the size of the marginal propensity to consume (MPC)? The MPS?

10.What is the logic of the multiplier-marginal propensity to consume (MPC) relationship?