MACROECONOMICS FOR TODAY
10th Edition
ISBN: 9781337613057
Author: Tucker
Publisher: CENGAGE L
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Question
Chapter 8, Problem 18SQ
To determine
The impact of increased autonomous consumption on consumption function.
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Suppose that consumption equals $500 billion when disposable income is $0 and that each increase of $100 billion in disposable income causes consumption to increase by $70 billion. Draw a graph of consumption function using this information. What is the slope of the consumption function?
Which 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.
Explain what the consumption function shows, and describe what is held constant along the consumption function.
Describe what happens when firms and workers underestimate future prices in the economy. Focus your answer on what would happen to actual output as opposed to the expected potential output.
Chapter 8 Solutions
MACROECONOMICS FOR TODAY
Ch. 8.4 - Prob. 1YTECh. 8 - Prob. 1SQPCh. 8 - Prob. 2SQPCh. 8 - Prob. 3SQPCh. 8 - Prob. 4SQPCh. 8 - Prob. 5SQPCh. 8 - Prob. 6SQPCh. 8 - Prob. 7SQPCh. 8 - Prob. 8SQPCh. 8 - Prob. 9SQP
Ch. 8 - Prob. 1SQCh. 8 - Prob. 2SQCh. 8 - Prob. 3SQCh. 8 - Prob. 4SQCh. 8 - Prob. 5SQCh. 8 - Prob. 6SQCh. 8 - Prob. 7SQCh. 8 - Prob. 8SQCh. 8 - Prob. 9SQCh. 8 - Prob. 10SQCh. 8 - Prob. 11SQCh. 8 - Prob. 12SQCh. 8 - Prob. 13SQCh. 8 - Prob. 14SQCh. 8 - Prob. 15SQCh. 8 - Prob. 16SQCh. 8 - Prob. 17SQCh. 8 - Prob. 18SQCh. 8 - Prob. 19SQCh. 8 - Prob. 20SQ
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- Create a diagram to explain the three main characteristics of the consumption function.arrow_forwardsuppose the government in this economy decides to decrease government purchases by 300 billion decrease in government purchases will lead to a decrease in income generating an initial change in consumption equal toarrow_forwardQ.1.7 If the marginal propensity to consume increases: (2)(1) The slope of the consumption function will be steeper. (2) There will be a movement from left to right along the consumption function. (3) The consumption function will shift parallel upwards. (4) The consumption function will shift parallel downwards.arrow_forward
- Which of the following is correct? When the consumption function lies above the 45-degree line, households (a) spend on consumption a decreasing percentage of any increase in income.(b) save all of any increase in income.(c) are dissaving.(d) spend on consumption an increasing percentage of any increase in income. Give proper explanatationsarrow_forwardThe consumption function shows a positive relationship between an individual's stock of wealth and his level of planned consumption. a positive relationship between disposable income and planned consumption. a negative relationship between planned consumption and aggregate saving. a negative relationship between disposable income and planned consumption.arrow_forward
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