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INDUCED CHANGE: A change in aggregate expenditures, especially consumption expenditures, that is "induced" or triggered by a change in national income or gross domestic product. Induced changes form the foundation for the multiplier effect, which is set in motion by autonomous changes in aggregate expenditures. In terms of Keynesian economics and the Keynesian cross diagram, induced changes are seen as a movement along in the aggregate expenditures line. This two step process, autonomous changes causing induced changes, is key to explaining business cycle fluctuations.

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Lesson 9: Consumer Demand | Unit 3: Marginal Utility Page: 15 of 22

Topic: Unit Review <=PAGE BACK | PAGE NEXT=>

In this unit, you should have learned about:
  • Marginal utility as the extra satisfaction obtained from consuming more units of a good.
  • How marginal utility is identified as the change in total utility due to a change in the quantity.
  • The marginal utility schedule as a table relating marginal utility and the quantity consumed.
  • How marginal utility decreases with the quantity consumed until it becomes negative.
  • The law of diminishing marginal utility which states that marginal utility declines when more of a good is consumed.
  • Why the law of diminishing marginal utility results from fulfilling a want or need.
  • The potential relation between the law of demand and the law diminishing marginal utility.
  • How the diamond-water paradox illustrates the difference between total utility and marginal utility.

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KEYNESIAN ECONOMICS

A theory of macroeconomics developed by John Maynard Keynes based on the proposition that aggregate demand is the primary source of business-cycle instability and the most important cause of recessions. Keynesian economics points to discretionary government policies, especially fiscal policy, as the primary means of stabilizing business cycles and tends to be favored by those on the liberal end of the political spectrum. The basic principles of Keynesian economics were developed by Keynes in his book, The General Theory of Employment, Interest and Money, published in 1936. This work launched the modern study of macroeconomics and served as a guide for both macroeconomic theory and macroeconomic policies for four decades. Although it fell out of favor in the 1980s, Keynesian principles remain important to modern macroeconomic theories, especially aggregate market (AS-AD) analysis.

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The first U.S. fire insurance company was established by Benjamin Franklin in 1752 in Philadelphia.
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