Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 30, Problem 4RQ
To determine
Shift in saving and consumption schedules.
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Given the following information about each economy , either calculate the missing variable or determine that it cannot be calculated . [LO 7.2,7.3] a. If C=\$20.1 billion, I=\$3.5 billion G=\$5.2 billion, and NX=-\$1 billion, what is total income ? b. If total income is $1 trillion G=\$0.3 tr trillion , and C=\$0.5 trillion , what is I? c. If total expenditure is $675 billion, C=\$433 billion , I = $105 billion , and G=\$75 billion , what is NX ? How much are exports ? How much are imports?
Crusoe will live this period and the next period as the lone inhabitant of his island. His only income is a crop of 100 coconuts that he harvests at the begin- ning of each period. Coconuts not consumed in the current period spoil at the rate of 10 percent per period. (LO5) a. Draw Crusoe’s intertemporal budget constraint. What will be his consump- tion in each period if he regards future consumption as a perfect, one-for- one substitute for current consumption? b. What will he consume each period if he regards 0.8 unit of future consump- tion as being worth 1 unit of current consumption?
Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy�s multiplier is 3. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? The aggregate demand curve will shift_____ by $____ billion. In what direction and by how much will it eventually shift? The aggregate demand curve will shift_____ by $____ billion..
Chapter 30 Solutions
Economics (Irwin Economics)
Ch. 30.2 - Prob. 1QQCh. 30.2 - Prob. 2QQCh. 30.2 - Prob. 3QQCh. 30.2 - Prob. 4QQCh. 30.5 - Prob. 1QQCh. 30.5 - Prob. 2QQCh. 30.5 - Prob. 3QQCh. 30.5 - Prob. 4QQCh. 30 - Prob. 1DQCh. 30 - Prob. 2DQ
Ch. 30 - Prob. 3DQCh. 30 - Prob. 4DQCh. 30 - Prob. 5DQCh. 30 - Prob. 6DQCh. 30 - Prob. 7DQCh. 30 - Prob. 8DQCh. 30 - Prob. 9DQCh. 30 - Prob. 1RQCh. 30 - Prob. 2RQCh. 30 - Prob. 3RQCh. 30 - Prob. 4RQCh. 30 - Prob. 5RQCh. 30 - Prob. 6RQCh. 30 - Prob. 7RQCh. 30 - Prob. 8RQCh. 30 - Prob. 9RQCh. 30 - Prob. 1PCh. 30 - Prob. 2PCh. 30 - Prob. 3PCh. 30 - Prob. 4PCh. 30 - Prob. 5PCh. 30 - Prob. 6PCh. 30 - Prob. 7PCh. 30 - Prob. 8PCh. 30 - Prob. 9PCh. 30 - Prob. 10P
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- 5 3. permanent Income Hypothesis a) suppose that beta=.9 and R= 2222 (that is ~22%). For an individual who acts according to the PIH, will their consumption next period be higher than current consumption or lower? b) What is the main crucial difference between the Keynesian Consumption function and the consumption function derived from the PIH (or Lifetime Income Hypothesis)? c) If Present Value of future income stream is 500,000 and a person has a beta of.8, how much will their consumption go up today if only today's income increases by 1000? How much will their consumption increase (approximately) if their income goes up by 1000 in all periods?arrow_forward12. Given this diagram of Consumption and Savings functions, What will be the level of savings at an income level of 60? 6. Given this diagram of Consumption and Savings functions, What will be the level of savings at an income level of 20? 07. Given this diagram of Consumption and Savings functions, What is the level of total desired consumption at income level of 80? 8. Given this diagram of Consumption and Savings functions, What is the level of "induced consumption" at income level of 40arrow_forward2. In macroeconomic theory, total or aggregate spending is denoted by A and total or aggregateproduction of income by Y. Which one of the following statements is incorrect? A When A is greater than Y, there is disequilibrium and Y will tend to increase.B When A is equal to Y, there is equilibrium and Y will remain unchanged.C When A is less than Y, there is disequilibrium and Y will decrease.D When A is greater than Y, there is disequilibrium and A will decrease.arrow_forward
- Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy's multiplier is 4. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? In what direction and by how much will it eventually shift?arrow_forward1. According to the Bureau of Economic Analysis, during therecession of 2007–2009, household saving as a fraction of dis-posable personal income increased from a low of just over1 percent in the first quarter of 2008 to 5 percent in the secondquarter of 2009. All else equal, what impact would this changein saving have on the MPC, MPS, and multiplier? How wouldthis change affect equilibrium output when planned invest-ment changes? 2. Assume in a simple economy that the level of saving is –500 whenaggregate output equals zero and that the marginal propensity tosave is 0.2. Derive the saving function and the consumption func-tion, and draw a graph showing these functions. At what level ofaggregate output does the consumption curve cross the 45° line?Explain your answer and show this on the graph.arrow_forward7 Consider a model in which an individual lives only two periods. This person has diminishing marginal utility of consumption and receives an income of $20,000 in period 1 and an income of $5,000 in period 2. The private interest rate is 10 percent per period, and this person can borrow or lend money at this rate. Also assume that this person intends to consume all of his income over his lifetime. a. Give a hypothetical numerical example of what a person’s optimal consumption would be over these two periods. In answering this question, what assumptions did you make?arrow_forward
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