write your answers, as long as they are legible. Most students find that it is easier to hand draw the graphs. 1. Assume that consumer confidence decreases, so that fixed consumption decreases by 200 (billions of $, assume that Y is measured in B of $). Furthermore, the marginal propensity to consume is 80%. Using the 4- panel diagram, you will determine what happens in each panel, except you will ignore the AD/AS panel for this question. For all graphs, label the initial equilibrium point A, the final equilibrium as point C, and you will use point B to illustrate the impact of the exogenous change, (holding either ror Y constant). a. Determine the decrease in Y as a result of the decrease in consumption, Co. Does this decrease in consumer confidence shift the IS curve or the LM curve? b. Draw a 4-panel diagram (except ignore the 4" AD/AS panel), labeling as many numerical values as possible. In your diagram, label point B after Co decreases, but assuming the interest rate is constant. As noted above, point C is your final equilibrium. Be sure to label points A, B, C in all three panels. C. For your final equilibridn point C, why does aggregate output "pullback" somewhat relative to point 87 Explain intuitively.

write your answers, as long as they are legible. Most students find that it is easier to hand draw the graphs. 1. Assume that consumer confidence decreases, so that fixed consumption decreases by 200 (billions of $, assume that Y is measured in B of $). Furthermore, the marginal propensity to consume is 80%. Using the 4- panel diagram, you will determine what happens in each panel, except you will ignore the AD/AS panel for this question. For all graphs, label the initial equilibrium point A, the final equilibrium as point C, and you will use point B to illustrate the impact of the exogenous change, (holding either ror Y constant). a. Determine the decrease in Y as a result of the decrease in consumption, Co. Does this decrease in consumer confidence shift the IS curve or the LM curve? b. Draw a 4-panel diagram (except ignore the 4" AD/AS panel), labeling as many numerical values as possible. In your diagram, label point B after Co decreases, but assuming the interest rate is constant. As noted above, point C is your final equilibrium. Be sure to label points A, B, C in all three panels. C. For your final equilibridn point C, why does aggregate output "pullback" somewhat relative to point 87 Explain intuitively.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

If a household’s income falls from R12 000 to R10 000, and its consumption fallsfrom R9 500 to R8 000, then: choose the correct answer(a) The marginal propensity to consume is ‐0.8. (b) The marginal propensity to consume is 0.75. (c) The marginal propensity to consume is 0.2. (d) The marginal propensity to save is 0.15
If Andrea’s disposable income increases from $600 to $700 and her level of personal consumption expenditures increases from $450 to $475. You may conclude that her marginal propensity to consume is: Group of answer choices 0.5 0.1 0.75 0.25
Suppose that investment demand increases by $100. Assume that households have a marginal propensity to consume of 80 percent. Compute the first three rounds of multiplier effects as follows: a) What are the first cycle changes in spending? Total cumulative change equals? b) What are the second cycle changes in spending? Total cumulative change equals? c) What are the third cycle changes in spending? Total cumulative change equals?
If a household’s income falls from R12 000 to R10 000, and its consumption falls from R9 500 to R8 000, then: The marginal propensity to consume is ‐0.8. The marginal propensity to consume is 0.75. The marginal propensity to consume is 0.2. The marginal propensity to save is 0.15.
Q.1.9 If a household’s income falls from R12 000 to R10 000, and its consumption fallsfrom R9 500 to R8 000, then:(2)(1) The marginal propensity to consume is ‐0.8. (2) The marginal propensity to consume is 0.75. (3) The marginal propensity to consume is 0.2. (4) The marginal propensity to save is 0.15.
. choose the correct answer: If Jack received a $1,000 bonus and his marginal propensity to save is 0.15, his consumption rises by______ and his saving rises by_______. $150; $500 (B) $850; $150 (C) $150; $850 (D) $1,000; $150 2) The marginal propensity to save is 0.15, the marginal propensity to consume: is 1.15. (B) is 0.85. (C) is 0.15. (D) cannot be determined by the given information.
Given consumption function C = 0.6Y + 35 1) Find the equilibrium level of income Y for the planned investment l = 12 ? 2)Find the equilibrium level of consumption
Find the value of MPC when multiplier is stated as 0.97
If the consumption function is given by C=20+3/4 Y then the value of multiplier will be???
Determine equilibrium levels of income and consumption for the following functions. a.C=20+0.75y,I=20, b.C=50+0.60y and I=30.where C&I, are consumption and investment respectively in billions of naira
Assume in country Y, the average marginal propensity to save is 0.2. When the aggregateincome is zero, consumers spend 50 to consume. Derive the saving function and consumptionfunction for this country. What happens to consumption when the propensity to savedecreases to 0.1? Explain your answer and show this on the graph.
Prove that the multiplier is equal to 1/(1-mpc)