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At a level of real disposable income of $10,000, suppose consumption is $11,000. Given this information, we know with certainty that saving equals
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- The consumption function shows a positive relationship between an individual's stock of wealth and his level of planned consumption. a positive relationship between disposable income and planned consumption. a negative relationship between planned consumption and aggregate saving. a negative relationship between disposable income and planned consumption.Q.1.7 An increase of R5 billion in income in a macroeconomy leads to an increase in R3 billion in consumption spending. From this information, we can determine that the marginal propensity to save in this economy is: (2) (a) 0.6; (b) 0.5; (c) 0.3; (d) 0.4Why is saving called a leakage? Why is planned investment called an injection? Why must saving equal planned investment at equilibrium GDP in the private closed economy? Are unplanned changes in inventories rising, falling, or constant at equilibrium GDP? Explain.
- If business taxes are reduced and the real interest rate increases: * A. consumption and saving will necessarily increase. B. the level of investment spending might either increase or decrease. C. the level of investment spending will necessarily increase D. the level of investment spending will necessarily decreaseWhat is the meaning of "animal spirits"? How do these relate to planned investment spending and to unplanned investment spending?The economy begins in equilibrium at point E, representing the real interest rate r1 at which saving S1 equals desired investment I1. What will be the new equilibrium combination of real interest rate, saving, and investment if the government cuts spending, holding other factors constant? options: point A point B point C point D
- Find the value of average propensity to save when the personal disposable income is 1200 billion and the consumption expenditure is 760 billion also find the saving alsoIf planned investment spending increases by $6 million, and consumers are likely to spend 80¢ for every dollar of disposable income they earn, how much will equilibrium output increase by a. $30 million b. $7.5 million c. $6 million d. $5 million e. $4.8 millionSuppose the MPC in an economy is 0.55. The APC is initially 0.65 and disposable income is $2 billion. If disposable income increases to $16 billion, what is the new level of saving? $5.6 billion $0.7 billion $7.2 billion $7.0 billion
- Explain the term random walk in consumption. Under what conditions will consumption follow such a behavior? Aggregate consumption varies less than GDP and aggregate investment varies more. Can you reconcile these observations with assumption that consumption and investment decisions are taken by rational forward-looking agents? How do changes in r affect expected consumption growth? Interpret the effect of r on expected consumption in the light of precautionary saving.Consider a closed economy with output of $200M, Consumption of $150M, and Government spending of $45M. If the investment function is I = 50 – r (in millions), what will the equilibrium interest rate be?Assume the following consumption schedule: C = 20 + 0.9Y, where C is consumption and Y is disposable income. At a(n) $1,000 level of disposable income, the level of saving is $80. $920. $180. $18.
