Solve all 3. The consumption functionSuppose that national income in a country is $30 billion, taxes paid by households are $12 billion, household consumption is $16 billion, and themarginal propensity to consume (MPC) is 0.7.On the following graph, use the blue line (circle symbol) to plot the economy's consumption function.CONSUMPTION (Billions of dollars)5045403530252015105005101520253035404550DISPOSABLE INCOME (Billions of dollars)Consumption Function? Suppose now that country's national income increases to $35 billion. Assuming the amount paid in taxes is fixed at $12 billion and that MPC = 0.7,what will be the new household consumption?$23.7 billion$19.5 billion$22.3 billion$21.6 billionGrade It NowSave & ContinueContinu

Given the information provided, let's calculate the new household consumption when the national…

Answered: 3. The consumption function Suppose…

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter9: Aggregate Demand

Section: Chapter Questions

Problem 1.3P

See similar textbooks

Similar questions

1.The following graphs show an economy's initial position at point B along its consumption function CFCF. Suppose disposable income suddenly and unexpectedly decreases. On the graph, shift either the CF curve or the initial point on the CF curve to show the impact of a fall in disposable income. 2.Now suppose that tensions in the Middle East lead to a rapid increase in the price of oil, which raises the general price level. On the following graph, shift either the CF curve or the initial point on the CF curve to show the impact of a rise in the price level.
Q) Consider the multiplier model (in which the only component of expenditure that depends on income is consumption), and suppose that investment expenditures decrease by $50 million. All else equal, then the spending-balance level of output will A) increase by $50 million B) decrease by $50 million C) decrease by more than $50 million D) decrease by less than $50 million Explain it early and correctly
Table 2 shows elements in the national income accounts of an economy. Assume the economy is currently in equilibrium. Elements £ billions Consumption (total) 80 Investment 9 Government Expenditure 6 Imports 15 Exports 8 What is the current equilibrium level of income? What is the level of injections? What is the level of withdrawals? If national income now rises by £22 billion and as a result, the consumption of domestically produced goods rises to £80 billion. Calculate the marginal propensity to consume (MPC)What is the value of the multiplier? What is the value of the multiplier? Comment on the results in part (3) and (4).
23) Refer to Figure 1.5. As income decreases, consumption decreases by a decreasing amount. If consumption is graphed on the vertical axis and income is graphed on the horizontal axis, the relationship between consumption and income would look like which of the following Panels? A) A B) B C) C D) D Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
ADVANCED ANALYSIS Suppose that the linear equation for consumption in a hypothetical economy is C = 60 + 0.75Y. Also suppose that income (Y) is $600. Determine the following values: Instructions: For parts a, b, d, and f, round your answers to 2 decimal places if necessary. For parts c and e, enter your answers as a whole number. a. MPC = b. MPS = c. Level of consumption = $ d. APC = e. Level of saving = $ f. APS =
Consider a hypothetical economy. Households spend $0.90 of each additional dollar they earn and save the remaining $0.10. The multiplier for this economy is . Suppose government purchases, G, in this economy decrease by $150 billion. The decrease in G will lead to a decrease in income, generating a decrease in consumption that decreases income yet again, and so on. Fill in the following table to show the impact of the change in G on the first two rounds of consumption spending and, eventually, on national income. Note: Use negative signs if numbers are negative. Change in G = −$150 billion First Change in Consumption = billion Second Change in Consumption = billion • • • • • • Total Change in Income = billion Now consider the impact of a similar change in taxes. The (absolute value) of the tax multiplier in this question will be ; thus, if taxes change by -$150 billion, spending will change by billion. Based on…
Consider a hypothetical economy. Households spend $0.50 of each additional dollar they earn and save the remaining $0.50. The multiplier for this economy is . Suppose government purchases, G, in this economy increase by $300 billion. The increase in G will lead to an increase in income, generating an increase in consumption that increases income yet again, and so on. Fill in the following table to show the impact of the change in G on the first two rounds of consumption spending and, eventually, on national income. Note: Use negative signs if numbers are negative. Change in G = $300 billion First Change in Consumption = billion Second Change in Consumption = billion • • • • • • Total Change in Income = billion Now consider the impact of a similar change in taxes. The (absolute value) of the tax multiplier in this question will be ; thus, if taxes change by $300 billion, spending will change by billion. Based on…
In an economy, autonomous consumption expenditure is $50 billion, investment is $200 billion, and government expenditure is $250 billion. Exports are $500 billion and imports are $450 billion. Assume that net taxes and imports are autonomous and price level is fixed. a)What is the consumotion function? b)What is the equation of the aggregate expenditure curve? c)Calculate equilibrium expenditure. d)Calculate the multiplier. e)If investment decreases to $150 billion, what is the change in equilibrium expenditure ?
Macroeconomics Question No.2 Suppose the consumption function is given by C = 100 + 0.8YD and that I = 50, while G=200, TR=62.5 and t=0.25. What is the equilibrium level of income? What is the level of saving in equilibrium? If investment were to rise to 150, what would be the effect be on equilibrium income. What is the value of multiplier in part a. and c. Draw a diagram indicating the equilibrium in part a. and c.
Table 2 shows elements in the national income accounts of an economy. Assume the economy is currently in equilibrium. elements billions Consumption (total) 80 Investment 9 Government Expenditure. 6 Imports 15 Exports 8 C) If national income now rises by £22 billion and as a result, the consumption of domestically produced goods rises to £80 billion. Calculate the marginal propensity to consume (MPC). D) What is the value of the multiplier? E) Comment on the results in part (c) and (d).
Suppose the following table shows the components of aggregate expenditure for an economy when disposable income is $200 billion and when it is $400 billion: Disposable Income $200 billion $400 billion Consumption $300 billion $400 billion Investment $100 billion $100 billion Government Purchases $175 billion $175 billion Net Exports $200 billion $180 billion Aggregate Expenditure $775 billion $855 billion On the following graph, use the blue curve to plot government purchases as a function of disposable income:
elaborate 3 determinants in which consumption can be increased according to the consumption function

SEE MORE QUESTIONS

Recommended textbooks for you

ECON MACRO

Economics

ISBN:

9781337000529

Author:

William A. McEachern

Publisher:

Cengage Learning

MACROECONOMICS

Economics

ISBN:

9781337794985

Author:

Baumol

Publisher:

CENGAGE L

ECON MACRO

Economics

ISBN:

9781337000529

Author:

William A. McEachern

Publisher:

Cengage Learning

MACROECONOMICS

Economics

ISBN:

9781337794985

Author:

Baumol

Publisher:

CENGAGE L

SEE MORE TEXTBOOKS