Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
7th Edition
ISBN: 9780134472669
Author: Blanchard
Publisher: PEARSON
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Chapter 3, Problem 9QAP
a.
To determine
To explain: The effects of a fall in consumer confidence on output level.
b.
To determine
To explain: The impact of the decrease in output on consumption, investment, private savings, and
c.
To determine
To explain: The impact of an increase in consumption expenditure on output, investment, private savings, and consumption.
d.
To determine
To comment: on the logic of the given statement.
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Suppose that the linear equation for consumption in a hypothetical economy is C = 40 + .8Y. Also suppose that income (Y ) is $400. Determine (a) the marginal propensity to consume, (b) the marginal propensity to save, (c) the level of consumption, (d ) the average propensity to consume, (e) the level of saving, and ( f ) the average propensity to save.
The paradox of saving revisited You should be able to complete this question without doing any algebra, although you may find making a diagram helpful for part (a). For this problem, you do not need to calculate the magnitudes of changes in economic variables—only the direction of change. a. Consider the economy described in Problem 8. Suppose that consumers decide to consume less (and therefore to save more) for any given amount of disposable income. Specifically, assume that consumer confidence (c0) falls. What will happen to output? b. As a result of the effect on output you determined in part (a), what will happen to investment? What will happen to public saving? What will happen to private saving? Explain. (Hint: Consider the saving-equals-investment characterization of equilibrium.) What is the effect on consumption? c. Suppose that consumers had decided to increase consumption expenditure, so that c0 had increased. What would have been the effect on output,…
Construct a consumption function from the data given here and determine the MPC.
Given the consumption function in the above question, what is the relationship between disposable income and consumption? Is it direct or indirect and then explain what it means.
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Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
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