EBK FOUNDATIONS OF ECONOMICS
8th Edition
ISBN: 8220103632225
Author: PARKIN
Publisher: PEARSON
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Question
Chapter 30, Problem 2SPPA
To determine
To explain:
The marginal propensity to consume (MPC) and to identify the change in consumption functions if wealth increases by $10 trillion.
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Which of the following would be most likely to increase consumption spending?
Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.
a
A reduction in consumer credit card debt
A drop in stock prices
A higher interest rate
C
d
The expectation of lower future prices
The table gives you information about the economy of
Australia.
Disposable
income
Saving
Consumption
expenditure
(billions of dollars per year)
0
0
Calculate consumption expenditure at each value of
disposable income and fill in the right column of the table.
100
25
200
50
Calculate the marginal propensity to consume.
300
75
The marginal propensity to consume is
>>> Answer to 2 decimal places.
Macroeconomics
Question No.2
Suppose the consumption function is given by C = 100 + 0.8YD and that I = 50, while G=200, TR=62.5 and t=0.25.
What is the equilibrium level of income?
What is the level of saving in equilibrium?
If investment were to rise to 150, what would be the effect be on equilibrium income.
What is the value of multiplier in part a. and c.
Draw a diagram indicating the equilibrium in part a. and c.
Chapter 30 Solutions
EBK FOUNDATIONS OF ECONOMICS
Ch. 30 - Prob. 1SPPACh. 30 - Prob. 2SPPACh. 30 - Prob. 3SPPACh. 30 - Prob. 4SPPACh. 30 - Prob. 5SPPACh. 30 - Prob. 6SPPACh. 30 - Prob. 7SPPACh. 30 - Prob. 8SPPACh. 30 - Prob. 9SPPACh. 30 - Prob. 1IAPA
Ch. 30 - Prob. 2IAPACh. 30 - Prob. 3IAPACh. 30 - Prob. 4IAPACh. 30 - Prob. 5IAPACh. 30 - Prob. 6IAPACh. 30 - Prob. 7IAPACh. 30 - Prob. 8IAPACh. 30 - Prob. 9IAPACh. 30 - Prob. 10IAPACh. 30 - Prob. 1MCQCh. 30 - Prob. 2MCQCh. 30 - Prob. 3MCQCh. 30 - Prob. 4MCQCh. 30 - Prob. 5MCQCh. 30 - Prob. 6MCQCh. 30 - Prob. 7MCQCh. 30 - Prob. 8MCQ
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Similar questions
- Which of the following would be most likely to increase consumption spending? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a A reduction in consumer credit card debt b A drop in stock prices A higher interest rate d The expectation of lower future pricesarrow_forwardIn 2009, the US Federal government cut taxes by approximately $300 billion, increased government spending by approximately $300 billion, and increased transfer payments by approximately $200 billion. Answer the following questions, assuming the marginal propensity to consume was 0.75. What was the maximum change in GDP from the government spending? Show your work.arrow_forwardThe table gives you information about the economy of Bluebird Island. Consumption expenditure Disposable income What is the marginal propensity to consume? (millions of 2012 dollars) 80 The marginal propensity to consume is 100 140 >>> Answer to 2 decimal places. 200 200 300 260 Enter your answer in the answer box. DD 00 80 888 F11 F10 F8 F9 F6 F7 F5 esc F3 F4 F1 F2 @ 24 1 2 4 6. 7 P Q W E |R Y tab * CO Tarrow_forward
- Step 2: The Effect of Saving on Total Expenditures The following table shows data for the economy before the decrease in saving. Suppose that the decrease in saving causes consumption to rise from $280 million to $320 million. Assume Say's law holds in this economy. Fill in the data for the economy after the decrease in saving. Before Saving Decrease $280 million $200 million $250 million $500 million $300 million Consumption (C) Investment (I) Government Purchases (G) Exports (EX) Imports (IM) As a result of the decrease in saving, total expenditures will After Saving Decrease $320 million million million $500 million $300 millionarrow_forwardWhich of the following would be most likely to increase consumption spending? Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer. a A reduction in consumer credit card debt b A drop in stock prices c A higher interest rate d The expectation of lower future pricesarrow_forwardWhat are the four categories of aggregate expenditure (demand)? Give an example of each. 9.1 Calculate the Marginal Propensity to Consume and the Marginal Propensity to Save. Fill in the blanks in the following table. Show that the MPC plus the MPS equals 1. National Income & Real GDP (Y) Consumption (C) Saving (S) MPC MPS $9,000 $8,000 $10,000 $8,600 $11,000 $9,200 $12,000 $9,800 $13,000 $10,400arrow_forward
- Calculate the Marginal Propensity to Consume and the Marginal Propensity to Save. Fill in the blanks in the following table. Show that the MPC plus the MPS equals 1. National Income & Real GDP (Y) Consumption (C) Saving (S) MPC MPS $9,000 $8,000 $10,000 $8,600 $11,000 $9,200 $12,000 $9,800 $13,000 $10,400arrow_forwardWhich of the following statements is most accurate? a.Most of the variation in consumption spending can be explained by changes in debt b. There is no single factor that explains much of the variation in consumption spending c. Most of the variation in consumption spending can be explained by changes in the interest rate. d. Most of the variation in consumption spending can be explained by changes in wealth e. most of the variation in consumption spending can be explained by changes in disposable income.arrow_forwardBased on the above graph, which of the following is wrong? Select one: a. Saving is inversely (negatively) related to disposable income. b. The marginal propensity to consume is constant at all levels of income and it is equal to the slope of the consumption schedule. c. The marginal propensity to save rises as disposable income rises. d. When consumption equals disposable income saving must be zero.arrow_forward
- The multiplier is the ratio of the change in ________ to a change in ________. Select one: a. the level of saving; the level of consumption b. autonomous consumption; induced consumption c. the MPC; the MPS d. the equilibrium level of output; some autonomous variablearrow_forward1.The marginal propensity to consume in this economy is 2.The equilibrium level of output in this economy isarrow_forwarda.Calculate the saving schedule. b.Determine the marginal propensities to consume (MPC) and save (MPS). c.Determine the break-even income. d.What is the relationship between the MPC and the MPS?arrow_forward
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