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Keynes viewed consumption as an activity based on psychology. Briefly discuss how the
work of David Laibson supports Keynes’ view?
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- Elaborate on the concept of consumption puzzle?The following graph represents an economy. Initially, they produced an aggregate output of $6,000 until they decreased consumption by $500. If price levels did not change, output would have fallen to $5,100. However, prices decreased because of the decrease in consumption, so output only fell to $5,400. Aggregat e Price SRAS 100 97 ADo AD Aggregat 5,10 5.40 6,00 e Outout a. Calculate the simple Keynesian multiplier if the price levels had not changed. Round the answer to the nearest two decimal points. b. Calculate the actual spending multiplier after the prices decreased. Round the answer to the nearest two decimal points.What are the various factors which influence propensity to consume
- Aggregate consumption varies less than aggregate investment. Briefly explain why this is true assuming that consumption and investment decisions are taken by rational and forward-looking agents.What is the shape of the keynesian consumption function with diagram?The marginal propensity to consume is is .3 find the marginal propensity to save.
- What is the consumption function? What is the marginal propensity to consume? What does an upward-sloping consumption function mean?How to calculate marginal propensity to consumeBased on the articles “Unemployment Claims Remain Historically High” and “US Consumer Spending Rose More Slowly in July” from the August 27, 2020 and August 28, 2020 issues of the wall Street Journal, respectively, please respond to the following questions: a. What do you think caused the substantial reversal in consumer spending after the dramatic drop during March and April of 2020? Illustrate graphically how would that have affected the consumption schedule. b. What seems to be possible reasons why consumer spending has slowed down in July and August? Are these factors consistent with some of the non-income determinants of consumption discussed in the text? If so, which ones? c. Investment spending also fell dramatically during the second quarter of 2020. What shifters in the investment demand curve seem to be important here? d. Given your answer to part c, explain and illustrate graphically using the investment demand curve diagram why a Federal Reserve policy of lower interest…