If the marginal propensity to save is 0.2, then a $10,000 decrease in disposable income will Select one: a. increase consumption by $2,000. b. increase consumption by $8,000. c. decrease consumption by $8,000. d. decrease consumption by $2,000.

If the marginal propensity to save is 0.2, then a $10,000 decrease in disposable income will Select one: a. increase consumption by $2,000. b. increase consumption by $8,000. c. decrease consumption by $8,000. d. decrease consumption by $2,000.

Principles of Macroeconomics (MindTap Course List)

7th Edition

ISBN:9781285165912

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Savings,Investment And The Financial System

Section: Chapter Questions

Problem 2QCMC

See similar textbooks

Related questions

Q: 2. The marginal propensity to consume must be smaller than one. Answer: Reason:

A: Consumption refers to that part of the income which is devoted towards the consumption of goods and…

Q: Q-1 The following table shows income and consumption: Calculate: A- Saving (S), B- Marginal…

A: In an economy, the income is earned by all sectors in the economy. This income is either spent on…

Q: 1) When disposable income increases from $14,500 to $18,700, consumption increases from $12,300 to…

A: "Marginal propensity to consume represents the proportion of addition to the disposable income spent…

Q: Question 1. The table below provides income and consumption data in billions of dollars:…

A: Marginal propensity to consume: The marginal propensity to consume (MPC) is an economic concept that…

Q: 7. Circle out the right answer! If marginal propensity to consume is 0.2 and taxes increase by 40,…

A: Ans. The tax multiplier is the ratio of change in income ( GDP) and changes in the taxes in the…

Q: 1. Suppose consumption C = 50 + 0.80 (YD), Government Purchases G = 50, Export X = 20, inflation…

A: Since you have asked multiple questions, we will solve first question for you. If you want any…

Q: 6. Assume that the Simonian economy has a recessionary gap of $400 million and the marginal…

A: Amount of government spending required = Recessionary gap / Government spending multiplier Amount of…

Q: Problem 1. The following specifications are given for an economy: Consumption, C = 250 + 0.75…

Q: In a closed economy with no government, a $1 billion increase in initial spending leads to a $5…

A: Multiplier effect occurs when change in aggregate spending leads to larger percentage change in Real…

Q: 2. The marginal propensity to save is 0.15, the marginal propensity to consume: (A) is 1.15. (B) is…

A: The marginal propensity to save is the proportion of an increase in income that is not spent but…

Q: The table below provides income and consumption data in billions of dollars: Disposable Income…

A: Disposable income(Yd) is the income which is left with the people after paying the taxes. Yd is…

Q: 1. Given the following information: C = 500 + 0.8 Yd, Ip = 300, G = 500, X = 500, T= 100 + 0.2 Y, M…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: Disposable Income Yd Consumption C $2,000 $2,040 2,100 2,120 2,200 2,200 2,300 2,280 2,400…

A: The marginal propensity to consume refers to percentage change in consumption with respect to…

Q: Question 2. The table below provides income and consumption data in billions of dollars:…

A: Marginal propensity to save: The marginal propensity to save (MPS) is an economic concept that is…

Q: What is the value of marginal propensity to consume (mpc)? What does it mean?

A: In economics, consumption function states the functional relationship between total consumption and…

Q: Average propensity Average propensity income ($) Consumption ($) Savings ($) to consume (APC) to…

A: All Blanks answers given below,

Q: 4 In a simple economy (assumé there are no taxes; thus, Y is disposable income), the consumption…

A: here we find the blanks and calculate the answer as follow-

Q: Table 1 - Income and consumption data Disposable Income ($billion) Total Consumption ($billion)…

A: Disposable income refers to the after-tax income. Savings equal the disposable income left over…

Q: 5) If an increase in investment spending of $50 million results in a $400 million increase in…

A: Multiplier shows the change in the one factor to a change in the other related factors. It shows the…

Q: Consider this economy: C = 100 + 0.5Y 1= 400 + 0.1Y Drag and drop options on the right-hand side and…

A: The marginal propensity to consume (MPC) is the percentage of an increase in salary that a consumer…

Q: 6. Suppose consumption is $10,000 when income is $9,000 and the marginal propensity to save equals…

A: The marginal propensity to save is the proportion of an increase in income that is not spent but…

Q: Q) For this question, assume the marginal propensity to consume is 0.7. a. Calculate the change in…

A: Public savings is the amount of savings which the government holds and Private savings is amount of…

Q: Suppose the government increases both taxes a government purchases by $10,000. Assuming th the…

A: the loanable funds doctrine is a theory of the market interest rate. According to this approach,…

Q: Assume the marginal propensity to save is 0.10. Firms become optimistic and increase investment…

A: Real GDP is the value of final goods and services produced in the economy within a given period of…

Q: 5. If consumption is $25,000 when income is $26,000, and consumption increases to $25,900 when…

A: Change in consumption=25,900-25,000=$900Change in income=28000-26000=$2000

Q: 2. In a closed economy with no government, a $1 billion increase in initial spending leads to a $5…

A: Given: Increase in total spending-$1 billion Increase in total income-$5 billion

Q: 7. The marginal propensity to save is 0.15, the marginal propensity to consume:

A: GIVEN The marginal propensity to save is 0.15 the marginal propensity to consume:

Q: 1. Use the following table with information on the consumption behavior of the people of Gotham to…

A: The consumption function (C) , which is the mix of autonomous and non-autonomous consumption,…

Q: 3. True or false? - Argue graphically and provide intuitions in the two-period consumption-saving…

A: Given information 2-period consumption model 2 periods: Current period and future period Government…

Q: 2. In a closed economy with no government, a $1 billion increase in initial spending leads to a $5…

A: The money multiplier depicts the relationship between initial investment and eventual impacts on…

Q: Q-1 The following table shows income and consumption: Calculate: A- Saving (S), B- Marginal…

A: The consumption function shows the level of consumption expenditure at different possible income…

Q: 6. How will the following situations affect the investment demand curve? (a) Unplanned inventories…

A: Unplanned inventories would cause investment demand curve to decrease,because it would lower…

Q: 5. The Bureau of Economic Analysis reported that, in real terms, overall consumer spending increased…

A: Given, Marginal propensity to consume (MPC) = 0.52 Consumer spending increased = $66.2 billion…

Q: 6. Explain that the sum total of marginal propensity to consume (c) and marginal propensity to save…

Q: If your marginal propensity to consume is 0.6 and you get an additional $600 in income, you would…

A: ‘Marginal propensity to consume’[MPC] indicates the proportion of the amount spent by a consumer in…

Concept explainers

Public Saving

Public saving deals with the amount which has been in excess after meeting all the obligatory expenses and investment of the government. Taxes are collected by the government to meet its day-to-day expenditures. The obligatory expenses include all those expenses which are mandatory for the government. It cannot be avoided as it is inevitable.

Question

61)If the marginal propensity to save is 0.2, then a $10,000 decrease in disposable income will

Select one:

a. increase consumption by $2,000.

b. increase consumption by $8,000.

c. decrease consumption by $8,000.

d. decrease consumption by $2,000.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1 Absolute Income Hypothesis

VIEW

Step 2 Absolute Income Hypothesis

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 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

6) If the marginal propensity to save is 0.4 and disposable income decreases from $2,000 to $1,000, saving will A) increase by $80. B) decrease by $80. C) decrease by $400. D) increase by $400. Note:- Please refrain from offering handwritten solutions. Please ensure that your response maintains accuracy and quality to avoid receiving a downvote. Take care of plagiarism. Answer completely. You will get up vote for sure.
2. In a closed economy with no government, a $1 billion increase in initial spending leads to a $5 billion increase in total income or output. a. What is the multiplier? b.What is the value of marginal propensity to save? c.What is the value marginal propensity to consume?
Question 2. The table below provides income and consumption data in billions of dollars:Disposable Income Consumption Savings 100 80 --- 200 150 --- Calculate the marginal propensity to save for the economy.A) 0.8B) 0.2C) 0.3D) 0.7
MCQ The table below provides income and consumption data in billions of dollars: Disposable Income Consumption Savings 100 80 --- 200 150 --- Calculate the marginal propensity to consume for the economy. A) 0.8 B) 0.2 C) 0.3 D) 0.7
1. The marginal propensity to consume is:A) the change in consumption divided by the change in income.B) consumption divided by income.C) the change in consumption divided by the change in saving.D) The change in saving divided by the change in income.
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.
In the economy of Spendsalot, the marginal propensity to save, MPS, is 0.8. What is the marginal propensity to consume, MPC, for Spendsalot? Which value does MPC determine? a.the slope of tax revenues as a function of GDP b.the slope of pre‑tax consumption as a function of GDP c.the slope of pre‑tax investment as a function of GDP d.the slope of government consumption as a function of GDP.
9. If the MPC is greater than zero but less than one, then we can be sure that when disposable income rises by P1 consumption will: a. not be affected b. will rise by more than P1 c. will rise by less than P1 d. will rise by exactly P1.
2. The marginal propensity to save is 0.15, the marginal propensity to consume:(A) is 1.15. (B) is 0.85. (C) is 0.15. (D) cannot be determined by the given information.
10. The breakeven point represents the level at which aggregate expenditures equal gross domestic product. True or false 12. The relationship between saving and the real interest rate is called investment demand. True or false 17. The daily use of the term investment, understood as the purchase of stocks or bonds, can cause confusion with the term capital invention. True or false
3.Suppose the marginal propensity to consume (MPC) equals 0.75. An increase in autonomous investment of $200 will lead to an increase in real Gross Domestic Product (GDP) by Part 2 A. $750. B. $1,000. C. $200. D. $800.
personal consumption expenditures (C) and disposable income (Y d): Year C Y d1 300 400 2 500 700 a. Compute the marginal propensity to consume. b. Compute the amount of savings for years 1 and 2. c. Compute the marginal propensity to save.