Which of the following statement is NOT true? Select one: A. APC + APS = 1 B. MPC = APC C. MPC + MPS =1 D. MPC + MPS = APC +APS An increase in expected future income________. Select one: A. decreases consumption expenditure B. increases saving C. shifts the consumption function upward D. shifts the saving function upward
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Which of the following statement is NOT true?
An increase in expected future income________.
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- The marginal propensity to consume out of permanent income equals 0.9 and the marginal propensity to consume out of transitory income equals 0.1. Suppose that there is an emergency increase in government spending of $200 billion to repair infrastructure. The spending takes place within a year. The spending increase is financed by a one-time increase in taxes. Prior to the increase in government spending, permanent income equals $9,600 billion and transitory income equals zero. (a) Compute the amounts of consumption expenditures and private saving prior to the tax increase. (b) Compute the amount of changes in consumption expenditures and private saving, given that the tax increase lasts for only one year. (c) Compute the initial change in aggregate demand that results from this combination of increases in government spending and taxes.Assume a closed economy in which disposable income starts at 1,000 and increases by 500; consumption starts at 1,100 and increases by 300; investment spending is 1,000 and government spending is 500. 1. The marginal propensity to consume (MPC) is equal to: 0.5 0.6 0.7 6 2. The multiplier is: 0.25 2 2.5 3 3.The consumption equation is: C = 500 + 0.6DI C = 500 + 0.5DI C = 100 + 0.75DI C = 100 + 0.6DI 4. Let ∆I = 1,000. What is the new equilibrium GDP" 7,000 7,500 2,000 8,500In 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.
- In an economy with no government and no foreign sectors, autonomous consumer spending is $250 billion, planned investment spending is $350 billion, and the marginal propensity to consume is 2/3. a) Plot the aggregate consumption function and planned aggregate spending. b) What is unplanned inventory investment when real GDP equal $600 billion? c) What is Y*, income-expenditure equilibrium GDP? d) What is the value of the multiplier? e) If planned investment spending rises to $450 billion, what will be the new Y*?Suppose disposable income increases by $2,000$2,000. As a result, consumption increases by $1,500$1,500. Answer the questions based on this information. Where appropriate, enter your answer as a decimal rather than as a percentage. 1) The increase in savings resulting directly from this change in income is 2)The marginal propensity to save (MPS) is 3)The marginal propensity to consume (MPC) isQ) 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.
- 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) 0.4If the MPS rises, then the MPC will: a. Fall b. Rise c. Stay the same In what direction will each of the following occurrences shift the consumption and saving schedules, other things equal? a. A large decrease in real estate values, including private homes. b. A sharp, sustained increase in stock prices. c. A 5-year increase in the minimum age for collecting Social Security benefits. d. An economywide expectation that a recession is over and that a robust expansion will occur. e. A substantial increase in household borrowing to finance auto purchases. Irving owns a chain of movie theaters. He is considering whether he should build a new theather downtown. The expected rate of return is 15 percent per year. He can borrow money at a 12 percent interest rate to finance the project. Should Irving proceed with this project? Which of the following scenarios will shift the investment demand curve right? (Select one or more answers) a. Business taxes increase b. The expected return…An economy has a marginal propensity to consume of 0.5, and Y*, the income-expenditure equilibrium GDP, equals $500 billion. Given an autonomous increase in planned investment of $10 billion, answer the following questions. a. What is the value of the multiplier? Value of the multiplier = b. What would you expect the total change in Y* to be based on the multiplier formula? Change in Y* based on the multiplier = billion c. What is the total change in real GDP after the 10 rounds? It may be beneficial to make a table on a separate sheet of paper to calculate the change in real GDP for each of the rounds, and then add up the values. Total change in real GDP (10 rounds) =
- Why 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 aggregate expenditures increase by $12 billion and equilibrium GDP consequently increases by $48 billion, then the marginal propensity to save in the economy must be: MPC= change in consumption/ change in income so MPC=12/48 or .25 So the MPS is .75 Is this correct?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. 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.
