Assume there are 2 people Xavier with a Marginal propensity to consume (MPC) of 80% and Francis with a Marginal Propensity to save (MPS) of 10%. Xavier enjoys life and has a minimum consumption of $10,000 without any income, while Francis is more modest, with a minimum consumption of $7,500 without any income. a. Demonstrate and explain the income expenditure model for Xavier and Francis on separate graphs with income ranging from 0 to $100,000 in $20,000 increments. b. Compare the minimum income levels where savings begins for Xavier and Francis. c. How does the difference in MPC affect the economies for each state? d. If the government decides to take all savings above $2,000, is this fair to Xavier? Francis? e. How might this change their behavior? How is this relevant to discussions about wealth inequality? How are individual choices relevant to wealth inequality?

Assume there are 2 people Xavier with a Marginal propensity to consume (MPC) of 80% and Francis with a Marginal Propensity to save (MPS) of 10%. Xavier enjoys life and has a minimum consumption of $10,000 without any income, while Francis is more modest, with a minimum consumption of $7,500 without any income. a. Demonstrate and explain the income expenditure model for Xavier and Francis on separate graphs with income ranging from 0 to $100,000 in $20,000 increments. b. Compare the minimum income levels where savings begins for Xavier and Francis. c. How does the difference in MPC affect the economies for each state? d. If the government decides to take all savings above $2,000, is this fair to Xavier? Francis? e. How might this change their behavior? How is this relevant to discussions about wealth inequality? How are individual choices relevant to wealth inequality?

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter19: The Keynesian Model In Action

Section: Chapter Questions

Problem 16SQ

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Hello, I would like help on this assignment Thank you Assume there are 2 people Xavier with a Marginal propensity to consume (MPC) of 80% and Francis with a Marginal Propensity to save (MPS) of 10%. Xavier enjoys life and has a minimum consumption of $10,000 without any income, while Francis is more modest, with a minimum consumption of $7,500 without any income. Demonstrate and explain the income-expenditure model for Xavier and Francis on separate graphs with income ranging from 0 to $100,000 in $20,000 increments. Compare the minimum income levels where savings begins for Xavier and Francis. How does the difference in MPC affect the economies for each state? If the government decides to take all savings above $2,000, is this fair to Xavier? Francis? e. How might this change their behavior? How is this relevant to discussions about wealth inequality? How are individual choices relevant to wealth inequality?
Suppose the consumption function is given by C(Y)=60+0.8(Y-T) where Y represents output and T stands for net taxes. Suppose further that the level of investment, I, is 400, the level of government expenditure, G, is 300, and net taxes, T, are 200. What is the value of the marginal propensity to save? a. 5 b. 0.2 c. 0.8 d. 1
Suppose there is some hypothetical closed economy in which households spend $0.75 of each additional dollar they earn and save the remaining $0.25. The marginal propensity to consume (MPC) for this economy is (.25/.75/1/1.33/4) , and the spending multiplier for this economy is (.25/.75/1/1.33/4). Suppose the government in this economy decides to decrease government purchases by $250 billion. The decrease in government spending will lead to a decrease in income, creating an initial change in consumption equal to $_____ billion . This decreases income yet again, leading to a second change in consumption equal to $_______billion . The total change in demand resulting from the initial change in government spending is $ _______trillion. The following graph shows the aggregate demand curve (AD1AD1) for this economy before the change in government spending. Use the green line (triangle symbol) to plot the new aggregate demand curve (AD2AD2) after the multiplier effect takes place. For…
Suppose there is some hypothetical closed economy in which households spend $0.85 of each additional dollar they earn and save the remaining $0.15. The marginal propensity to consume (MPC) for this economy is____ , and the spending multiplier for this economy is ____. Suppose the government in this economy decides to decrease government purchases by $300 billion. The decrease in government spending will lead to a decrease in income, creating an initial change in consumption equal to _____ . This decreases income yet again, leading to a second change in consumption equal to ____ . The total change in demand resulting from the initial change in government spending is ____.
Suppose that the following equations describe the 4-sector economyConsumption function C= 60 + 0.8 Yd,Investment function I= 100-5i,% interest rate i=6 (use 6 to compute for the investment),Government Expenditure G= 76,Lump sum Tax Tx= 15,Transfer payments TR=60,Exports X=70Imports M=20+0.2Y 5.1. Calculate the equilibrium level of income. At this level of income, is the economy operating with a budget surplus or budget deficit?5.2. Calculate the investment, government, tax, transfer payments and foreign trade multiplier.5.3. Suppose that government increases its education and health services by 65, what is the new level of income?5.4. If exports increase by 10, what is the new level of income? Is the economy operating with a trade deficit or surplus at this level of income?
Suppose the following data for an economy; a consumption function of C = 800 + 0.8Yd, Investment spending is fixed at 300, Government purchases are 400, and net taxes are 100. A.) What is the MPC, MPS, and the value of the tax multiplier? B.) Suppose government increases taxes by 100, use the corresponding multiplier to calculate the new equilibrium level of income. C.) Check to ensure that the multiplier worked (confirm algebraically that your answer in B is correct, that is, solve for the new equilibrium level of income (Y)).
Suppose there is some hypothetical closed economy in which households spend $0.65 of each additional dollar they earn and save the remaining $0.35. The marginal propensity to consume (MPC) for this economy is 0.65 , and the spending multiplier for this economy is 2.8571 . Suppose the government in this economy decides to increase government purchases by $350 billion. The increase in government spending will lead to an increase in income, creating an initial change in consumption equal to (blank). This increases income yet again, leading to a second chance in consumption equal to (blank) . The total change in demand resulting from the initial change in government spending is (blank) .
Hello, I would like help on this assignment. I sent it earlier and the first three subparts were answered but I was told that I need to submit again to have the solution of the rest. Thank you Assume there are 2 people Xavier with a Marginal propensity to consume (MPC) of 80% and Francis with a Marginal Propensity to save (MPS) of 10%. Xavier enjoys life and has a minimum consumption of $10,000 without any income, while Francis is more modest, with a minimum consumption of $7,500 without any income. Demonstrate and explain the income-expenditure model for Xavier and Francis on separate graphs with income ranging from 0 to $100,000 in $20,000 increments. Compare the minimum income levels where savings begins for Xavier and Francis. How does the difference in MPC affect the economies for each state? If the government decides to take all savings above $2,000, is this fair to Xavier? Francis? e. How might this change their behavior? How is this relevant to discussions about wealth…
Which one of the following statements relating to marginal propensity to consume is INCORRECT? (a) Marginal propensity to consume for a given consumption function is usually less than 1; (b) If the people in a country save 30c out of every rand they earn, the marginal propensity to consume in this country is said to be 0.7; (c) If the marginal propensity to consume is given as 0.622, then the value of the simple multiplier will be 2.5; (d) The larger the value of the marginal propensity to consume, the steeper the consumption function will be.
Choose the correct answer: . If consumption is $25,000 when income is $26,000, and consumption increases to $25,900 when income increases to $28,000, the marginal propensity to consume is: 0,59. (B) 0.65. (C) 0.55. (D) 0.45. 2) Suppose consumption is $10,000 when income is $9,000 and the marginal propensity to save equals 0.1. When income increases to $9,500, consumption will be: $8,500. (B) $10,450. (C) $10,500. (D) $10,050.
Q) For this question, assume the marginal propensity to consume is 0.7. a. Calculate the change in private saving, public saving, national saving, and investment when taxes increase $100. b. Calculate the change in private saving, public saving, national saving, and investment when government purchases decrease $100. c. Which causes a larger change in investment, the increase in taxes in part a or the decrease in government purchases in part b? Support your answer. Explain it correctly and all subparts.
Consider a hypothetical closed economy in which households spend $0.80 of each additional dollar they earn and save the remaining $0.20. The marginal propensity to consume (MPC) for the economy is______, and the spending multiplier for the economy is______. suppose the government in this economy decides to decrease the government purchases by $300 billion. The decrease in government purchases will lead to a decrease in income generating an initial change in consumption equal to______. This decreases income yet again, causing a second change in consumption equal to_______. the total change in demand resulting from the initial change in government spending is_____________. The following graph shows that aggregate demand curve (AD1) for this economy before the change in government spending. Use the green line (triangle symbol) to plot the new aggregate demand curve (AD2) after the spending multiplier effect takes place. Hint: be sure that the new aggregate demand curve (AD2) is parallel…