EBK ECONOMICS TODAY
18th Edition
ISBN: 9780133920116
Author: Miller
Publisher: YUZU
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Question
Chapter 12, Problem aFCT
To determine
To show:
The differences in the average propensity to save for higher-income group and lower-income group with brief explanation.
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- Explain why the sum of marginal propensity to consume and marginal propensity to saving it's equal to one?arrow_forwardWhat is The Effect of a Government Budget Deficit on Investment?arrow_forwardAgreement and disagreement among economists Suppose that Musashi, an economist from a business administration program in Georgia, and Rina, another economist from a nonprofit institution in the Midwest, are both guests on a popular science podcast. The host of the podcast is facilitating their debate over saving incentives. The following dialogue represents a portion of the transcript of their discussion: Rina: I think it's safe to say that, in general, the savings rate of households in today's economy is much lower than it really needs to be to sustain an improvement in living standards. Musashi: I think a switch from the income tax to a consumption tax would bring growth in living standards. Rina: You really think households would change their saving behavior enough in response to this to make a difference? Because I don't. The disagreement between these economists is most likely due to DIFFERENCES BETWEEN PERCEPTION VERSUS REALITY or DIFFERENCES IN SCIENTIFIC JUDGEMENTS…arrow_forward
- Why is investment spending unstable?arrow_forwardEconomists often argue that a large increase in government purchases – such as for the military – will crowd out private-sector spending. Use the investment-saving diagram to defend or to refute their premise.arrow_forwardWhen the value of average propensity to save is negative, then the value of marginal propensity to save will also be negative.arrow_forward
- Average propensity to save is always greater than 0 True/Falsearrow_forwardAssume there is no discretionary increase in government spending. Explain how an improving economy will affect the budget balance and, in turn, investment and the trade balance.arrow_forwardGive two examples each of revenue receipts and capital receipts in a financial budget.arrow_forward
- Illustrate how the demand and supply for new homes has changed in 2023.arrow_forwardSuppose the economy goes into a recession and private households wish to save more while businesses wish to invest less. Suppose that at the same time Congress wishes to 'get its fiscal house in order' and balance the federal budget. (Assume there is no foreign trade.) According to the lectures, which of the following is not possible. Households (in the aggregate) successfully save more than intended investment while the federal government successfully balances the budget. Increased leakages through savings and taxes, compounded by decreased government and investment spending, create a 'paradox of thrift' situation The government successfully balances the budget O Congress is surprised that higher taxes and lower outlays actually increased the federal deficit The private sector runs a 'surplus', saving more than it investsarrow_forwardHow to calculate marginal propensity to savearrow_forward
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