The investment demand curve would shift to the right if the cost of acquiring, operating, or maintaining capital goods declined; business taxes decreased; a technological change favoring new investment occurred; the stock of capital goods on hand relative to sales decreased; firms' decided to increase inventories; or expectations about higher future profits from investment increased.
In the aggregate expenditures model one focus is on the consumption schedule which is the relationship between the consumption part of aggregate expenditures and disposable income.Graphically this relationship is illustrated with consumption measured on the vertical axis and disposable income measured on the horizontal axis.If the two were equal, the relationship would follow a straight line along the 45-degree line.Historical data and the aggregate expenditures model suggest that it is a direct relationship, and that households spend a larger proportion of a small income than of a large disposable income.In other words, consumption as a proportion of income falls as disposable income increases.
Since saving is the difference between disposable income and consumption spending, the saving schedule also shows a direct relationship between saving and disposable income.Graphically, it is depicted with saving on the vertical axis and disposable income measured on the horizontal axis.At very low income levels, dissaving is believed to occur and saving increases proportionally as income rises.
(a) APC = .75 ($6,000/$8,000).
(b) MPS = .4 ($800/$2,000); MPC = .6 (1 - .4).
(c) APC fell to.72 ($7,200/$10,000).