Answer the following questions using information from the pieture below: a) Construct the consumption function Corumption s00 300 b)Use reasoning to derive the equation for the savings function c) Find the break-even point. d) Sketch to show and then explain (1) what happens to the consumption function when the level of autonomous consumption Increases by $100. (l1) what happens to the consumption function when marginal propensity to save (MPS) falls by o.1. Caumion Pol 00 500 00 Explanations: (II) 9 True/ False. When disposable income changes, the consumption function pivots. Briefly explain your answer

Answer the following questions using information from the pieture below: a) Construct the consumption function Corumption s00 300 b)Use reasoning to derive the equation for the savings function c) Find the break-even point. d) Sketch to show and then explain (1) what happens to the consumption function when the level of autonomous consumption Increases by $100. (l1) what happens to the consumption function when marginal propensity to save (MPS) falls by o.1. Caumion Pol 00 500 00 Explanations: (II) 9 True/ False. When disposable income changes, the consumption function pivots. Briefly explain your answer

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter18: The Keynesian Model

Section: Chapter Questions

Problem 9SQP

See similar textbooks

Similar questions

these bottom two are solved I am just struggling with how to graph the consumption function and the breakeven condition for this problem and to Point out the income and consumption values relevant for these problems: 3. The marginal propensity to consume (MPC) is 0.75, which means that households spend 75% of each additional dollar of income. The starvation-level consumption is 6, which means that households will consume at least 6 dollars, regardless of their income. Therefore, the amount that households will save can be found by subtracting their minimum consumption level from their gross income, multiplying the difference by the MPC, and subtracting the lump-sum tax: Savings = (1 - MPC) * (Gross Income - Starvation-level Consumption) - Lump-sum Tax Savings = (1 - 0.75) * (40 - 6) - 10 Savings = 0.25 * 34 - 10 Savings = 1.5 Therefore, households will save $1.5. 3. a) How should the lump-sum income tax change to allow households to save 3? To allow households to save…
Assume in a simple economy that the level of saving is –500 whenaggregate output equals zero and that the marginal propensity tosave is 0.2. Derive the saving function and the consumption func-tion, and draw a graph showing these functions. At what level ofaggregate output does the consumption curve cross the 45° line?Explain your answer and show this on the graph.
Q.1.14 In the Keynesian model, what is the most important determinant of ahousehold’s consumption?(a) Disposable income.(b) Total wealth.(c) The number of persons in the household.(d) Its’ net wealth. Q.1.15 Induced consumption is: (a) the part of consumption which is independent of the level of income.(b) the minimum level of consumption that is financed from sources otherthan income.(c) The maximum level of consumption that is financed from sources otherthan income.(d) shown by the slope of the consumption function.Q.1.16 In the Keynesian model, an introduction of a proportional tax will: (a) increase the slope of the consumption function.(b) reduce the multiplier.(c) increase the equilibrium level of income.(d) increase the multiplier.Q.1.17 A decrease in the price level will: (a) shift the AS curve to the left.(b) shift the AD curve to the left.(c) shift the AS curve to the right.(d) leave both the AD curve and the AS curve unchanged.
Assume in country Y, the average marginal propensity to save is 0.2. When the aggregateincome is zero, consumers spend 50 to consume. Derive the saving function and consumptionfunction for this country. What happens to consumption when the propensity to savedecreases to 0.1? Explain your answer and show this on the graph.
QUESTIONS GO WITH GRAPH 1. Given this diagram of Consumption and Savings functions, what is the mpc (marginal propensity to consume? 2. Given this diagram of Consumption and Savings functions, What is the level of Ca (autonomous consumption)? 3. Given this diagram of Consumption and Savings functions, What is the level of "induced consumption" at income level of 40?
Equation for consumption is C=40/(0.8Y) where Y= yearly income = $400. The marginal propensity to consume is _______?
19 In this consumption function C= C0 + C1*Yd equation; C0 Known as Select one: a. Autonomous consumption b. Marginal propensity to consume c. Disposable income d. Induced consumption
We again assume asimple closed economy with GDP of 100 and:c0(autonomous consumption) = 20c1 (marginal propensity to consume) = 0.6I (investment) = 20.a) Now assume that c0falls by 5 (i.e. 5% of GDP), i.e. for any given level of output,consumption will fall by 5. Show the implied fall in the AD function in yourdiagram and show that output will fall by more than 5.b) Show that the multiplier is equal to 2.5, and hence that, in the new equilibrium,output will have fallen by 12.5 (i.e. by 12.5%)c) How big would the impact be if, say, c1 = 0.4 or c1 = 0.8? Explain the difference.
If the consumption function is given by C=20+3/4 Y then the value of multiplier will be???
Allie has a marginal propensity to consume of 0.75. What does this mean? a. He's spending more than he's making in income b. 75 cents of every additional dollar of his income is saved. c. 75 cents of every additional dollar of his income is spent on consumption. d. 25 cents of every additional dollar of his income is spent on consumption.
The Wilson family has a disposable income of $70,000 annually. Currently, the Wilson family spends 80% of new disposable income on consumption. Assume that their marginal propensity to consume is 0.8 and that their autonomous consumption spending is equal to $10,000. What is the amount of the Wilson family's annual consumer spending?
Given a consumption function, C = c0 + cY, specified such that the marginal propensity to consume is 75%, what will consumption expenditure be if total income is £538bn? a. £584+ c0 bn b. £403.5 + c0 bnc. £538 + c bnd. £403.5 bn