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    income and consumption relationship

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    1. Discuss the income and consumption relationship make sure to define marginal propensity to consume. If you received an extra dollar, how much of it would you spend?

    2. Why is the aggregate demand curve downward sloping? Specify how your explanation differs from the explanation for the downward sloping demand curve for a single product.

    3. Explain: "Unemployment can be caused by a decrease of aggregate demand or a decrease of aggregate supply." In each case, specify price level outcomes

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    Solution Summary

    The income and consumption relationships are discussed.