AGGREGATE DEMAND AND MULTIPLIER

• THE MULTIPLIER- This the ratio of the change in equilibrium output to the change in autonomous spending that causes the change in output.
• The larger the marginal propensity to consume, the larger Is the multiplier
• The higher is the marginal propensity to save, the more of each to income leaks put of the circular flow
• FOREIGN EXHANGE

  • The term used to denote the value of foreign money in terms of local currency
• Appreciation – the peso appreciates in value when the amount of peso to acquire a US dollar becomes smaller
• -          The peso is more valuable when it appreciates
• BSP – manages foreign reserves 
• Depreciation – the peso depreciates when the price of the US dollar increases in terms of pesos
• Devaluation – a currency that is devalued is a currency that depreciates in value
• Fixed exchange rates – an exchange rate system where the government controls the exchange rate by fixing its value against other currencies
• Floating exchange rates – an exchange rate system where the government does not fix or control the exchange rate between two currencies, but allows market forces to determine the exchange rate