MACROECONOMICS FOR TODAY
10th Edition
ISBN: 9781337613057
Author: Tucker
Publisher: CENGAGE L
expand_more
expand_more
format_list_bulleted
Question
Chapter 8, Problem 5SQP
(a):
To determine
Impact of expected prolonged recession on the consumption function.
(b):
To determine
Impact of sharp stock
(c):
To determine
Impact of price rise on the consumption function.
(d):
To determine
Impact of rise of interest rate on consumer loans on the consumption function.
(e):
To determine
Impact of rise in income tax on the consumption function.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Q)Which of the following changes will shift the consumption function upward? Part 2 A. an increase in wealth B. a decrease in wealth C. a decrease real disposable income D. an increase in real 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.
What is the consumption function? What is the marginal propensity to consume? What does an upward-sloping consumption function mean?
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
Knowledge Booster
Similar questions
- Create a diagram to explain the three main characteristics of the consumption function.arrow_forwardWhich of the following correctly describes how a decrease in the price level affects consumption spending? Select one: a. A decrease in the price level raises real wealth, which causes consumption to increase. b. A decrease in the price level decreases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase. c. A decrease in the price level increases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase. d. A decrease in the price level lowers real wealth, which causes consumption to decrease.arrow_forwardGive 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.arrow_forward
- Consider an economy described by the following equations: Y = C+I+G C = 100+0.75 (Y-T) I = 500-50r G = 125 T = 100 where Y is GDP, C is consumption, I is investment, G is government purchases, T is taxes, and r is the interest rate. If the economy were at full employment (that is, at its natural rate), GDP would be 2,000. Explain the meaning of each of these equations. What is the marginal propensity to consume in this economy? Suppose the central bank’s policy is to adjust the money supply to maintain the interest rate at 4 percent, so r = 4. Solve for GDP. How does it compare to the full-employment level? Assuming no change in monetary policy, what change in government purchases would restore full employment? Assuming no change in fiscal policy, what change in the interest rate would restore full employment?arrow_forwardUse the diagram below to answer the question If the marginal propensity to consume increases A. the consumption function will shift parallel upwards. B. there will be a movement from left to right along the consumption function. C. the consumption function will shift parallel downwards. D. the slope of the consumption function will be steeper.arrow_forwardClearly explain the characteristics of the consumption function.arrow_forward
- On the following graph, use the blue curve to plot investment as a function of disposable income: According to the table, investment is: a. Autonomous with respect to disposable income b. Responsive to changes in interest rates c. Responsive to changes in business expectations d. Correlated with consumption A terrorist attack that makes business forecasts more pessimistic would cause the investment function you drew previously to a. Slope upward b. Shift up c. Shift down d. Slope downwardarrow_forwardelaborate 3 determinants in which consumption can be increased according to the consumption functionarrow_forwardVery briefly summarize the relationships shown by (a) the consumption schedule, (b) the saving schedule, (c) the investment demand curve, and (d) the multiplier effect. Which of these relationships are direct (positive) relationships and which are inverse (negative) relationships? Why are consumption and saving in the United States greater today than they were a decade ago?arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
- Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage LearningEconomics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc
Macroeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning