Consumption is a highly volatile component of aggregate expenditure.

The marginal propensity to consume is the slope of the aggregate expenditure function (C + I).

An increase in income causes an upward shift of the consumption function.

The term autonomous planned investment means that changes in income have no impact on the level of planned investment expenditures.

The multiplier is a concept used to describe the impact of a change in autonomous expenditures on equilibrium income.

When aggregate expenditure is greater than aggregate income, unplanned investment is positive, and firms will plan to decrease production in the next period.

The sum of planned investment plus unplanned investment always equals saving.

The larger the marginal propensity to consume, the smaller the resulting multiplier.

Our analysis of production and spending assumes that firms do not have complete control over their investment decisions, but households have complete control over their consumption decisions.

Our analysis of production and spending assumes that firms have more control over inventory investment than over physical investment.