Answered: From the preceding data, you know that…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.75. That is, if disposable income increases by $1, consumption increases by 75¢.

Suppose further that last year disposable income in the economy was $500 billion and consumption was $450 billion.

On the following graph, use the blue line (circle symbol) to plot this economy's consumption function based on these data.

Fill in the blanks

From the preceding data, you know that the level of saving in the economy last year was ____________billion and the marginal propensity to save in this economy is ___________.

Suppose that this year, disposable income is projected to be $700 billion. Based on your analysis, you would expect consumption to be _______ billion and saving to be ________ billion.

(?
700
600
Consumption Function
500
400
300
200
100
-100
100
200
300
400
500
600
700
800
DISPOSABLE INCOME (Billions of dollars)
CONSUMPTION (Billions of dollars)

From the preceding data, you know that the level of saving in the economy last year was $
billion and the marginal propensity to save in this
economy is
Suppose that this year, disposable income is projected to be $700 billion. Based on your analysis, you would expect consumption to
be
billion and saving to be$
billion.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions