When income is zero within the Keynesian cross model planned expenditure will be greater than zero and the intercept of the consumption function will hence not be zero either. The reason for this feature of the model is that either: The Marginal Propensity to Save (MPS) is greater than 0.5 The Marginal Propensity to Consume (MPC) is greater than 0.5 Autonomous consumer expenditure depends only on the level of national income Autonomous consumer expenditure does not depend on the level of national income Only one answer can be correct. Please pick one and explain your reasoning.

When income is zero within the Keynesian cross model planned expenditure will be greater than zero and the intercept of the consumption function will hence not be zero either. The reason for this feature of the model is that either: The Marginal Propensity to Save (MPS) is greater than 0.5 The Marginal Propensity to Consume (MPC) is greater than 0.5 Autonomous consumer expenditure depends only on the level of national income Autonomous consumer expenditure does not depend on the level of national income Only one answer can be correct. Please pick one and explain your reasoning.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter18: The Keynesian Model

Section: Chapter Questions

Problem 9SQP

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these bottom two are solved I am just struggling with how to graph the consumption function and the breakeven condition for this problem and to Point out the income and consumption values relevant for these problems: 3. The marginal propensity to consume (MPC) is 0.75, which means that households spend 75% of each additional dollar of income. The starvation-level consumption is 6, which means that households will consume at least 6 dollars, regardless of their income. Therefore, the amount that households will save can be found by subtracting their minimum consumption level from their gross income, multiplying the difference by the MPC, and subtracting the lump-sum tax: Savings = (1 - MPC) * (Gross Income - Starvation-level Consumption) - Lump-sum Tax Savings = (1 - 0.75) * (40 - 6) - 10 Savings = 0.25 * 34 - 10 Savings = 1.5 Therefore, households will save $1.5. 3. a) How should the lump-sum income tax change to allow households to save 3? To allow households to save…
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