EBK MACROECONOMICS (FOURTH EDITION)
4th Edition
ISBN: 9780393616125
Author: Jones
Publisher: YUZU
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Question
Chapter 11, Problem 11E
(a)
To determine
The change in consumption when a person receives $100,000 via a will.
(b)
To determine
The effect of an unexpected promotion on the level of consumption.
(c)
To determine
The change in consumption due to the imposition of a one-time tax that costs $10,000.
(d)
To determine
The change in consumption when a person won a lottery worth $10 million.
(e)
To determine
The change in consumption when a person won a lottery worth $10 million but the payment is made 5 years from now.
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Students have asked these similar questions
Suppose that you are a PIH consumer. You expect to live for another 24 years. You expect to work for another 19 years. You just learned that you will receive a permanent raise at your job of $1700. Answer the following: (a) How much extra do you consume this year? (b) What is your marginal propensity to consume out of this income change?
2. Suppose you are economist and have the following data:
Consumption;
Income;
75
253
85
185
98
212
108
180
118
185
You want to investigate the effect of income on consumption.
a)Write and estimate your model
b)interpret the results
assume you are given a $100 raise, and
decide to save $20 of that money. also
assume that if you make zero income in a
year, you will still spend $7000.
a.) what is your consumption function?
b.) if you earn $20000 in a year how much will
you spend?
c.) will you be able to save while earning the
above income?
Chapter 11 Solutions
EBK MACROECONOMICS (FOURTH EDITION)
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Similar questions
- 7. If a person's income is $40,000, how much do you predict that they will spend on consumption? 8. The R-squared, or coefficient of determination, from this regression is 0.844. Interpret the R-squared.arrow_forwardAssume that that tax revenues (T) are proportional to income (Y). That means if the tax rate is equal to t, then we have T = tY.Also, consumption (C) and investment (I) functions are given as the following: C = a + b (Y – T) [where a and b are constant]I = c – dr. [where c and d are constant, and r is the interest rate] A) Find the expression of the government purchase multiplier. (Use derivative) B) What will happen to multiplier if tax rate increases? What will happen to multiplier if MPC increases?arrow_forwardPlease note that the bold red and blue lines below demonstrate the quantity versus price relationship for supply and demand in normal circumstances for a particular product. Note: The horizontal axis is quantity, and the Vertical axis is price. 2900 2800 2700 2600 2500 2400 2300 2200 2100 2000 1900 1800 1700 1600 1500 1400 1300 1200 1100 1000 900 800 700 600 500 400 300 200 100 0 -Curve A -Curve B 0 Supply and Demand Curves: →→ Curve C 5 10 15 20 25 30 35 40 --Curve D ---Curve E -Curve F 45 50 55 60 65 70 75 80 85 90 95 100 105arrow_forward
- Suppose the savings rate (s) in the economy is 30%, GDP is $1,000, and investment can be expressed as I=s*Y. Calculate the level of investment in this economy. Question 9 options: 1) $600. 2) $330. 3) $300. 4) $150.arrow_forward3. Suppose that you are interested in answering the question of how consumption reacts to tax increases. In recent years, government has imposed tax increases to fund increased infrastructure spending. If you could design an ideal experiment to answer this question, how would you do so? Do you think it would be practical to use this experiment on a large scale?arrow_forwardUse the graphs to illustrate the effect of a decrease in consumer income expectations on the consumption (C) function and the savings (S) function. Real consumption 500 450 400 350 300 250 200 150 100 50 0 0 50 C = DI с 100 150 200 250 300 350 400 450 500 Real disposable income (DI) Real savings 500 450 400 350 300 250 200 150 100 50 0 -50 -100 -150 0 50 100 150 200 250 300 350 Real disposable income (DI) S 400 450 500arrow_forward
- You are an economic advisor to the government. Discuss your opinion . a) How COVID-19 pandemic will affect the consumption behavior as well as the investment done by the firms and household for the next two years? b) What are the actions or policies that the government can implement to face this situation? please answers with analysis and --graph (if possible)arrow_forwardQUESTION ONE Consider a model with two periods, each with one composite consumption good. Prices are the stable and normalized to 1. Suppose a consumer is endowed with income 20 in the first period and 60 in the second period. The consumer receives a 10% interest rate on savings and is subject to a 20% interest rate on borrowing. Regulations prohibit the consumer from borrowing more than 20. (a) Find this consumer's budget constraint. (b) Carefully graph the budget set. Label all intercepts.arrow_forwardA consumer's current income (y) is 200 and the future income ( t.') is 240. A current lump sum tax (t) of 10 is paid and the tax in the next period (t) is 15. The real interest rate is 20% for each period. Please assume that current and future consumption are complements. and the consumer always prefers to have one unit of current consumption and two units of consumption in the future. Calculate the optimal current and future consumption and the optimal current and future savings. Is the consumer a lender or a borrower? How does he she. as a lender or a borrower. affect the future consumption?arrow_forward
- Choose the correct answerarrow_forward23) Refer to Figure 1.5. As income decreases, consumption decreases by a decreasing amount. If consumption is graphed on the vertical axis and income is graphed on the horizontal axis, the relationship between consumption and income would look like which of the following Panels? A) A B) B C) C D) D Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardSuppose you know the following facts about consumer behavior of Amy in 2019. In a year, Amy spends $10000 on basic household items regardless of how much she is earning. For every dollar of disposable income earned, Amy spends 50% on extra purchases. Amy pays taxes in the amount of $1000, and receives no transfers. Use this information to: Derive Amy’s consumption function in nominal terms. Suppose the price level index in the economy for 2019 is estimated to be P = 2. Rewrite the consumption function in real terms.arrow_forward
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