Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 9.1, Problem 2ST
To determine
Explain the relationship between saving, consumption and total spending.
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In 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.
According to the multiplier concept when there is a change in any one of the components of total expenditures (C, I, G, or X-IM), a multiple impact upon:
a) the rate of unemployment will occur.
b) saving in the economy will occur.
c) household expenditures will occur.
d) income will occur.
According to Keynes, wealth or credit is a factor that affects consumption. An example of wealth is A,B,C,OR D one answer
a
an increase in expected future income.
b
a decline in interest rates.
c
an increase in economic output.
d
an increase in the value of stock
Chapter 9 Solutions
Macroeconomics
Ch. 9.1 - Prob. 1STCh. 9.1 - Prob. 2STCh. 9.1 - Prob. 3STCh. 9.2 - Prob. 1STCh. 9.2 - Prob. 2STCh. 9.2 - Prob. 3STCh. 9.3 - Prob. 1STCh. 9.3 - Prob. 2STCh. 9.3 - Prob. 3STCh. 9 - Prob. 1QP
Ch. 9 - Prob. 2QPCh. 9 - Prob. 3QPCh. 9 - Prob. 4QPCh. 9 - Prob. 5QPCh. 9 - Prob. 6QPCh. 9 - Prob. 7QPCh. 9 - Prob. 8QPCh. 9 - Prob. 9QPCh. 9 - Prob. 10QPCh. 9 - Prob. 11QPCh. 9 - Prob. 12QPCh. 9 - Prob. 13QPCh. 9 - Prob. 14QPCh. 9 - Prob. 15QPCh. 9 - Prob. 16QPCh. 9 - Prob. 17QPCh. 9 - Prob. 18QPCh. 9 - Prob. 1WNGCh. 9 - Prob. 2WNGCh. 9 - Prob. 3WNGCh. 9 - Prob. 4WNGCh. 9 - Prob. 5WNGCh. 9 - Prob. 6WNGCh. 9 - Prob. 7WNG
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- In the classical model, what are the effects of an increase in government spending?arrow_forwardIf planned expenditures are below actual production, what will happen to income? Explain the process by which this happens.arrow_forwardIn a closed economy with no government, a £1 billion increase in investment leads to a £5 billion increase in consumption. What is the value of the marginal propensity to consume?arrow_forward
- Please answer the following question. Thanks! Consider a classical economy described as follows: ? = ?^(1/2)?^(1/2) , where L is the amount of labor and K is the amount of capital. The economy has 10,000 units of labor and 10,000 units of capital. Consumption (C): 5,020-100r, Investment (I) : 2,000-100r, Taxes (T): 2,500, Government Purchases (G) :3,000arrow_forwardThe marginal propensity to consume is: the amount of consumption at a specific level of income. the fraction of a change in income that is consumed or spent. a change in saving divided by a change in consumption. consumption times income.arrow_forward
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