PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 13, Problem 13.4CC
To determine
Graphically, explain the change in output gap as it rises by 10 units.
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Q.1.15 Induced consumption is: (a) the part of consumption which is independent of the level of income.(b) the minimum level of consumption that is financed from sources other than income.(c) The maximum level of consumption that is financed from sources other than income.(d) shown by the slope of the consumption function.Q.1.16 In the Keynesian model, an introduction of a proportional tax will: (a) increase the slope of the consumption function.(b) reduce the multiplier.(c) increase the equilibrium level of income.(d) increase the multiplier.Q.1.17 A decrease in the price level will: (a) shift the AS curve to the left.(b) shift the AD curve to the left.(c) shift the AS curve to the right.(d) leave both the AD curve and the AS curve unchanged. Q.1.18 During(a) increases, increasesan economic expansion, real GDP ____ and unemployment ____. (b) increases, decreases(c) decreases, increases(d) decreases,…
The Wilson family has a disposable income of $70,000 annually. Currently, the Wilson family spends 80% of new disposable income on consumption. Assume that their marginal propensity to consume is 0.8 and that their autonomous consumption spending is equal to $10,000.
What is the amount of the Wilson family's annual consumer spending?
If planned investment spending increases by $6 million, and consumers are likely to spend 80¢ for every dollar of disposable income they earn, how much will equilibrium output increase by
a.
$30 million
b.
$7.5 million
c.
$6 million
d.
$5 million
e.
$4.8 million
Chapter 13 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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- Consider the hypothetical country of Kejimkujik. Suppose that national income in Kejimkujik is $300 billion, households pay $100 billion in taxes, household consumption is equal to $160 billion, and the marginal propensity to consume (MPC) is 0.6. On the following graph, use the blue line (circle symbol) to plot the economy's consumption function. Consumption Function050100150200250300350400450500500450400350300250200150100500CONSUMPTION (Billions of dollars)DISPOSABLE INCOME (Billions of dollars) Suppose now that Kejimkujik’s national income increases to $330 billion. Assuming the amount paid in taxes is fixed at $100 billion and that MPC = 0.6, what is the new amount of household consumption? $148 billion $219.4 billion $220.6 billion $178 billionarrow_forwardDue to an increase in consumer wealth, there is a $40 billion autonomous increase in consumer spending in the economies of Westlandia and Eastlandia. Assuming that the aggregate price level is constant, the interest rate is fixed in both countries, and there are no taxes and no foreign trade, complete the accompanying tables to show the various rounds of increased spending that will occur in both economies if the marginal propensity to consume is 0.5 in Westlandia and 0.75 in Eastlandia. What do your results indicate about the relationship between the size of the marginal propensity to consume and the multiplier?arrow_forwardQ1 4. Suppose you earn same income as one of your cousins but expect to live longer than your cousin, how would your consumption function be different than that of your cousin? Would you consumer more or less than him? 6. Average propensity to consumer along a linear consumption function is always constant; true or false? Justify your response.arrow_forward
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