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- Give an example of a consumption good and an example of an investment good. Explain why the two are different, as a macroeconomist would think of them differently. Also, explain why investment is important for the long term health of an economy.After the reccesion of economy caused by Covid19, why do experts expect a ‘U’ shaped recovery rather than a ‘V’ shaped recovery?In your answer explain the difference between the two types of recoveries.7. Consider a neoclassical growth economy described by the following.•Yt = K0.3t ·L0.7t (aggregate production function)•s = 0.35 (saving rate)•δ = 0.10 (depreciation rate)•n = 0.01 (population growth rate)•L1 = 120 (initial population)•K1 = 160 (initial capital stock)•g = 0 (technological growth rate)Compute K, Y , k, y, and c for the first three periods. Please report numerical answers to two decimal points.
- Question : Fisher's two period model implies that as long as consumption in both periods is as a normal good, then an increase in income in period two: a- increases consumption in period 1 only. b-increases consumption in period 2 only. c. does not increas consumption in either period. d. increases consumption in both periods. e. increases consumption in period 1 and reduce consumption in period.Explain the criticism of life cycle theory of consumption and highlight the importance of economic modelsWhat is the proponsity to consumption function? explain with formulae of average propensity to consume in micro economy.
- What could increase autonomous consumption (Ca)? a) An increase in the products price level. b) A decrease in consumer wealth. c) A decrease in income taxes. d) A decrease in the Index of Consumer Confidence e) An expectation of lower future inflationConsider the intertemporal model of consumption studied in class, with two possible periods. Consider initially that an individual is a borrower. If the interest rate increases: (a)The individual will never become a saver. (b)The individual will always remain a borrower. (c)The individual will be worse off, provided she remains a borrower. (d)The individual can be better off, but only if she becomes a saver. Both c and d.What of the following summarises the the paradox thirft? a. if all people reduce their consumption, the additional saving makes higher investment possible. b. if all people try to increase their saving simultaneously then consumption, income and emplyment will fall but the volume of saving will remain unchanged. c. higher saving is required to achieve higher investment. d. the proprotion of national income saved decreases if the marginal propensity to consume decreases.
- Use the following macroeconomic model structure to answer the questions followed. 8 pts C = 300 + 0.8Yd; C = consumption function; Yd (Y-T) = disposable income I = 200; I = Investment G = 400; G = Government expenditure T = 200; T = Tax revenue Also assume that Yf = Full employment GDP (Potential GDP) = 5,000 8.1. The equilibrium GDP level (income) is _________. Hint: Ye = C+I+G a. 2,850 b. 3,700 c. 3,145 d. 3,800 8.2. At the equilibrium level of output, the aggregate consumption level is: a. 3,100 b. 3,250 c. 3,400 d. 3,625 8.3. At the equilibrium level of output, the aggregate saving level is: a. 550 b. 450 c. 400 d. 350 8.4. The MPC and MPS for the economy is respectively: a. 0.9 and 0.1 b. 0.85 and 0.15 c. 0.75 and 0.25 d. 0.80 and 0.20Suppose land increases by 20% and the number of employed workers increases by 25% in country A. Given this information, explain what will happen to consumption per worker at the new steady state equilibrium, following the initial changes.Give typing answer with explanation and conclusion Which of the following statements concerning consumption is incorrect? A. WEALTHY PEOPLE CONSUME MORE THAN OTHER PEOPLE. B. EXPECTATIONS ABOUT FUTURE PRICES AFFECT CONSUMPTION. C. MARGINAL PROPENSITY TO CONSUME USUALLY DECREASES AS INCOMES RISE. D. SAVINGS RATES DECREASE AS INCOME INCREASES. E. TAX INCREASES REDUCE CONSUMPTION.