The consumption function.

Question

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Answer 1

Question

Chapter 19, Problem 1QQ

To determine

The consumption function.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

According to the Keynesian consumption function, the saving rate in the economy increases as the income of the people increases. However, the data collected by Simon Kuznets reveals that the saving rate is stable. According to Keynes, the marginal propensity to consume is less than one and the average propensity to consume decreases as the income increases. This implies that as the income of people increases, the proportionate level of saving increases compared to the consumption. However, the studies conducted by Kuznets reveal that the average propensity to consume does not fall in the long run. This implies that the saving will not increase and hence it remains constant. Thus, option (b) is correct.

Option (a):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases. However, the studies conducted by Kuznets show that the saving rate is stable and it does not decrease in the long run. Thus, option (a) is incorrect.

Option (c):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable and it does not increase in the long run. Thus, option (c) is incorrect.

Option (d):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable. Thus, option (d) is incorrect.

Economics Concept Introduction

Savings: Savings is defined as that part of income that is not consumed in the current period and is to be used for future consumption.

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Students have asked these similar questions

Give typing answer with explanation and conclusion Which of the following statements concerning consumption is incorrect? A. WEALTHY PEOPLE CONSUME MORE THAN OTHER PEOPLE. B. EXPECTATIONS ABOUT FUTURE PRICES AFFECT CONSUMPTION. C. MARGINAL PROPENSITY TO CONSUME USUALLY DECREASES AS INCOMES RISE. D. SAVINGS RATES DECREASE AS INCOME INCREASES. E. TAX INCREASES REDUCE CONSUMPTION.

Explain the difference between saving and investment as defined by a macroeconomist. Which of the following situations represent investment and which represent saving? Explain.a. Your family takes out a mortgage and buys a new house.You use your $200 paycheck to buy stock in Africel.Your roommate earns $100 and deposits it in his account at a bank.You borrow $1,000 from a bank to buy a car to use in your pizza delivery business.The interest rate is 7 percent. Use the concept of present value to compare $200 to be received in 10 years and $300 to be received in 20 years.A company has an investment project that would cost $10 million today and yield a payoff of $15 million in 4 years.Should the firm undertake the project if the interest rate is 11 percent? 10 percent? 9 percent? 8 percent?Can you figure out the exact cutoff for the interest rate between profitability and nonprofitability?

Hello . Can you please assist with the following queston below Q.1 State the three possible relationships between production, income andspending in macroeconomic theory. Q.2 Explain the relationship between consumption and saving in the Keynesian model.

Answer 2

Question

Chapter 19, Problem 1QQ

To determine

The consumption function.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

According to the Keynesian consumption function, the saving rate in the economy increases as the income of the people increases. However, the data collected by Simon Kuznets reveals that the saving rate is stable. According to Keynes, the marginal propensity to consume is less than one and the average propensity to consume decreases as the income increases. This implies that as the income of people increases, the proportionate level of saving increases compared to the consumption. However, the studies conducted by Kuznets reveal that the average propensity to consume does not fall in the long run. This implies that the saving will not increase and hence it remains constant. Thus, option (b) is correct.

Option (a):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases. However, the studies conducted by Kuznets show that the saving rate is stable and it does not decrease in the long run. Thus, option (a) is incorrect.

Option (c):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable and it does not increase in the long run. Thus, option (c) is incorrect.

Option (d):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable. Thus, option (d) is incorrect.

Economics Concept Introduction

Savings: Savings is defined as that part of income that is not consumed in the current period and is to be used for future consumption.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 19, Problem 1QQ

To determine

The consumption function.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

According to the Keynesian consumption function, the saving rate in the economy increases as the income of the people increases. However, the data collected by Simon Kuznets reveals that the saving rate is stable. According to Keynes, the marginal propensity to consume is less than one and the average propensity to consume decreases as the income increases. This implies that as the income of people increases, the proportionate level of saving increases compared to the consumption. However, the studies conducted by Kuznets reveal that the average propensity to consume does not fall in the long run. This implies that the saving will not increase and hence it remains constant. Thus, option (b) is correct.

Option (a):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases. However, the studies conducted by Kuznets show that the saving rate is stable and it does not decrease in the long run. Thus, option (a) is incorrect.

Option (c):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable and it does not increase in the long run. Thus, option (c) is incorrect.

Option (d):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable. Thus, option (d) is incorrect.

Economics Concept Introduction

Savings: Savings is defined as that part of income that is not consumed in the current period and is to be used for future consumption.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 19, Problem 1QQ

To determine

The consumption function.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

According to the Keynesian consumption function, the saving rate in the economy increases as the income of the people increases. However, the data collected by Simon Kuznets reveals that the saving rate is stable. According to Keynes, the marginal propensity to consume is less than one and the average propensity to consume decreases as the income increases. This implies that as the income of people increases, the proportionate level of saving increases compared to the consumption. However, the studies conducted by Kuznets reveal that the average propensity to consume does not fall in the long run. This implies that the saving will not increase and hence it remains constant. Thus, option (b) is correct.

Option (a):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases. However, the studies conducted by Kuznets show that the saving rate is stable and it does not decrease in the long run. Thus, option (a) is incorrect.

Option (c):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable and it does not increase in the long run. Thus, option (c) is incorrect.

Option (d):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable. Thus, option (d) is incorrect.

Economics Concept Introduction

Savings: Savings is defined as that part of income that is not consumed in the current period and is to be used for future consumption.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 19, Problem 1QQ

To determine

The consumption function.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

According to the Keynesian consumption function, the saving rate in the economy increases as the income of the people increases. However, the data collected by Simon Kuznets reveals that the saving rate is stable. According to Keynes, the marginal propensity to consume is less than one and the average propensity to consume decreases as the income increases. This implies that as the income of people increases, the proportionate level of saving increases compared to the consumption. However, the studies conducted by Kuznets reveal that the average propensity to consume does not fall in the long run. This implies that the saving will not increase and hence it remains constant. Thus, option (b) is correct.

Option (a):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases. However, the studies conducted by Kuznets show that the saving rate is stable and it does not decrease in the long run. Thus, option (a) is incorrect.

Option (c):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable and it does not increase in the long run. Thus, option (c) is incorrect.

Option (d):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable. Thus, option (d) is incorrect.

Economics Concept Introduction

Savings: Savings is defined as that part of income that is not consumed in the current period and is to be used for future consumption.

Answer 6

Chapter 19, Problem 1QQ

To determine

The consumption function.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

According to the Keynesian consumption function, the saving rate in the economy increases as the income of the people increases. However, the data collected by Simon Kuznets reveals that the saving rate is stable. According to Keynes, the marginal propensity to consume is less than one and the average propensity to consume decreases as the income increases. This implies that as the income of people increases, the proportionate level of saving increases compared to the consumption. However, the studies conducted by Kuznets reveal that the average propensity to consume does not fall in the long run. This implies that the saving will not increase and hence it remains constant. Thus, option (b) is correct.

Option (a):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases. However, the studies conducted by Kuznets show that the saving rate is stable and it does not decrease in the long run. Thus, option (a) is incorrect.

Option (c):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable and it does not increase in the long run. Thus, option (c) is incorrect.

Option (d):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable. Thus, option (d) is incorrect.

Economics Concept Introduction

Savings: Savings is defined as that part of income that is not consumed in the current period and is to be used for future consumption.

Answer 7

Chapter 19, Problem 1QQ

To determine

The consumption function.

Answer 8

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Option (b):

According to the Keynesian consumption function, the saving rate in the economy increases as the income of the people increases. However, the data collected by Simon Kuznets reveals that the saving rate is stable. According to Keynes, the marginal propensity to consume is less than one and the average propensity to consume decreases as the income increases. This implies that as the income of people increases, the proportionate level of saving increases compared to the consumption. However, the studies conducted by Kuznets reveal that the average propensity to consume does not fall in the long run. This implies that the saving will not increase and hence it remains constant. Thus, option (b) is correct.

Option (a):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases. However, the studies conducted by Kuznets show that the saving rate is stable and it does not decrease in the long run. Thus, option (a) is incorrect.

Option (c):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable and it does not increase in the long run. Thus, option (c) is incorrect.

Option (d):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable. Thus, option (d) is incorrect.