Question one a) i) ii) Given the following data derive the consumption function ( 5 marks)...
Question one
a)
i) ii)
Given the following data derive the consumption function ( 5 marks)
Derive the consumption function (4 marks)
Assuming that income (Y) is 1800, comment on the level of induced
consumption (2 arks)
|
House hold Saving |
-110 |
-90 |
-70 |
-50 |
|
Income (Y) |
200 |
300 |
400 |
500 |
b) DemonstrateyourunderstandingonRatcheteffectusingawelllabeleddiagram(4mks)
Homework Answers
Add Answer to:
Question one
a)
i) ii)
Given the following data derive the consumption function ( 5
marks)...
5. Graphing the consumption function from the MPC Consider a hypothetical economy in which the marginal...
5. Graphing the consumption function from the MPC Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.50. That is, if disposable income increases by $1, consumption increases by 50¢. Suppose further that last year disposable income in the economy was $400 billion and consumption was $350 billion. On the following graph, use the blue line (circle symbol) to plot this economy's consumption function based on these data. Consumption Function CONSUMPTION (Billions of dollars) 0 800...
Economic model is characterised by the following data: * Private consumption C = 800 + 0.9*DI...
Economic model is characterised by the following data:
* Private consumption C = 800 + 0.9*DI
* Gross investment Ig = 400
* Government spending G = 500
* Sum of Taxes T = 300
* Disposable income DI = Y – T
Calculate:
* Equilibrium level of income Y (Y= 14300)
* Private consumption at macroeconomic equilibrium C =
13400
Develop equation of saving and calculate amount of saving at
the point of macroeconomic equilibrium. S=. 600
Task 4....
For the data in the following table, the consumption function is C = 150 + 0.6(Y-T)....
For the data in the following table, the consumption function is C = 150 + 0.6(Y-T). Fill in the columns in the table: PLANNED PLANNED UNPLANNED NET DISPOSABLE CONSUMPTION INVESTMENT GOVERNMENT AGGREGATE INVENTORY OUTPUT TAXES INCOME SPENDING SAVING SPENDING PURCHASES EXPENDITURES CHANGE 1,050 50 150 200 1,550 50 200 2,050 50 150 200 150 Use your answers in the previous problem to answer the following questions: 1) How much of an increase in spending would be required to generate an...
2. Consider the following data table for a hypothetical economy. Aggregate Consumption Personal &n
2. Consider the following data table for a hypothetical economy. Aggregate Consumption Personal Planned Aggregate Aggregate Income Expenditure Saving Investment Expenditure Equilibrium 0 100 20 100 180 200 260 300 340 400 420 500 500 600 580 700 660 Complete the table Calculate and interpret MPC and MPS Write the equation of Consumption Function Determine the equilibrium level of Aggregate Income, Consumption Expenditure, and Personal Saving Calculate the Multiplier Calculate the change...
Suppose the following table describes the relation of consumption spending to the disposable income Disposable Income...
Suppose the following table describes the relation of consumption spending to the disposable income Disposable Income (Yp)|400 500 600 700 800 Consumption ( 390 470 550 630 710 (a) Derive the consumption function. Explain the two components of (e) What is the level of saving when the level of income equals to $900, to $350, to $300? Redraw the graphs from points (a) and (d) and show the areas of saving and dissaving. (f) Suppose income grows from $850 to...
Keynesian Consumption Function (billions of dollars per year) Real disposable income Consumption Saving MPC MPS $100...
Keynesian Consumption Function (billions of dollars per year) Real disposable income Consumption Saving MPC MPS $100 200 300 400 500 $150 200 250 300 350 a.) 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? 3. Explain why the MPC and the MPS must always add up to one. 4. How do households "dissave" 5. Explain how each...
Consider the following table showing aggregate consumption expenditures and disposable income. All values are expressed in...
Consider the following table showing aggregate consumption expenditures and disposable income. All values are expressed in billions of constant dollars. a. Compute desired saving at each level of disposable income. (Round your responses to the nearest whole number.) 50- Disposable Income (Y) Desired Consumption (C) NUL Savings 100 200 300 400 5 0 600 700 800 100 180 Savings (5) -50/ 260 100 200 300 400 500 600 340 420 500 580 Click the graph, choose a tool in the...
Question two a) Given the following information: S = - 400 +0.25 Y → saving function...
Question two a) Given the following information: S = - 400 +0.25 Y → saving function I = 200 - 100 r + Investment function t = 0.2 → Tax rate G = 100 + Government expenditure X = 10 + Exports = 150 + 0.06 Y M → Im port function ii) b) Explain why autonomous saving is negative (2 marks) Express interest rate in terms of income (5 marks) Briefly explain the absolute income hypothesis ( 3 marks)
For the data in the following table, the consumption function is C = 150 + 0.6(Y-1)....
For the data in the following table, the consumption function is C = 150 + 0.6(Y-1). Y T Yd с S G AE Unplanned Inventory 1,050 50 1,000 750 300 150 200 1,100 -50 1,550 50 1,500 1,050 500 150 200 1,400 150 50 2,050 2,000 1,350 700 150 200 1,700 350 Sketch a figure showing the relationship between the aggregate output (Y) and the planned aggregate expenditure (AE):
The following table shows income and consumption. 350 Consumption $70 280- Income $100 $200 $300 $400...
The following table shows income and consumption. 350 Consumption $70 280- Income $100 $200 $300 $400 $500 $140 $210 $280 $350 Consumption ($) Using the multipoint curved line drawing tool, draw the consumption function given the data in the table above. Label this line 'C'. Carefully follow the instructions above, and only draw the required object. The slope of the line represents Ő 100 200 300 Income ($) 400 500 O A. government spending. O B. autonomous consumption. O C....
5. Graphing the consumption function from the MPC Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.50. That is, if disposable income increases by $1, consumption increases by 50¢. Suppose further that last year disposable income in the economy was $400 billion and consumption was $350 billion. On the following graph, use the blue line (circle symbol) to plot this economy's consumption function based on these data. Consumption Function CONSUMPTION (Billions of dollars) 0 800...
Economic model is characterised by the following data:
* Private consumption C = 800 + 0.9*DI
* Gross investment Ig = 400
* Government spending G = 500
* Sum of Taxes T = 300
* Disposable income DI = Y – T
Calculate:
* Equilibrium level of income Y (Y= 14300)
* Private consumption at macroeconomic equilibrium C =
13400
Develop equation of saving and calculate amount of saving at
the point of macroeconomic equilibrium. S=. 600
Task 4....
For the data in the following table, the consumption function is C = 150 + 0.6(Y-T). Fill in the columns in the table: PLANNED PLANNED UNPLANNED NET DISPOSABLE CONSUMPTION INVESTMENT GOVERNMENT AGGREGATE INVENTORY OUTPUT TAXES INCOME SPENDING SAVING SPENDING PURCHASES EXPENDITURES CHANGE 1,050 50 150 200 1,550 50 200 2,050 50 150 200 150 Use your answers in the previous problem to answer the following questions: 1) How much of an increase in spending would be required to generate an...
Suppose the following table describes the relation of consumption spending to the disposable income Disposable Income (Yp)|400 500 600 700 800 Consumption ( 390 470 550 630 710 (a) Derive the consumption function. Explain the two components of (e) What is the level of saving when the level of income equals to $900, to $350, to $300? Redraw the graphs from points (a) and (d) and show the areas of saving and dissaving. (f) Suppose income grows from $850 to...
Keynesian Consumption Function (billions of dollars per year) Real disposable income Consumption Saving MPC MPS $100 200 300 400 500 $150 200 250 300 350 a.) 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? 3. Explain why the MPC and the MPS must always add up to one. 4. How do households "dissave" 5. Explain how each...
Consider the following table showing aggregate consumption expenditures and disposable income. All values are expressed in billions of constant dollars. a. Compute desired saving at each level of disposable income. (Round your responses to the nearest whole number.) 50- Disposable Income (Y) Desired Consumption (C) NUL Savings 100 200 300 400 5 0 600 700 800 100 180 Savings (5) -50/ 260 100 200 300 400 500 600 340 420 500 580 Click the graph, choose a tool in the...
Question two a) Given the following information: S = - 400 +0.25 Y → saving function I = 200 - 100 r + Investment function t = 0.2 → Tax rate G = 100 + Government expenditure X = 10 + Exports = 150 + 0.06 Y M → Im port function ii) b) Explain why autonomous saving is negative (2 marks) Express interest rate in terms of income (5 marks) Briefly explain the absolute income hypothesis ( 3 marks)
For the data in the following table, the consumption function is C = 150 + 0.6(Y-1). Y T Yd с S G AE Unplanned Inventory 1,050 50 1,000 750 300 150 200 1,100 -50 1,550 50 1,500 1,050 500 150 200 1,400 150 50 2,050 2,000 1,350 700 150 200 1,700 350 Sketch a figure showing the relationship between the aggregate output (Y) and the planned aggregate expenditure (AE):
The following table shows income and consumption. 350 Consumption $70 280- Income $100 $200 $300 $400 $500 $140 $210 $280 $350 Consumption ($) Using the multipoint curved line drawing tool, draw the consumption function given the data in the table above. Label this line 'C'. Carefully follow the instructions above, and only draw the required object. The slope of the line represents Ő 100 200 300 Income ($) 400 500 O A. government spending. O B. autonomous consumption. O C....
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