Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 10, Problem 5P
To determine
Consumption and saving.
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Very 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?
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Quèstion 23
Assume the following consumption schedule: C= 20 + 0.9 Y, where C is consumption and Y is disposable income. At $1,100 level of disposable come: (show your
calculations)
a Find out the level of saving and consumption? (
b. How much are the APC and APS (to one decimal place)?
c. If disposable income increased to $2,800 and saving is $345 now. What are MPC and MPS (to two decimal places)? J
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suppose the wealth effect is such that a $10 change in wealth produces a $2 change in consumption at each level of income. assume real estate prices tumble such that wealth declines by $160.
A. What will be the new level of consumption at the $680 billion level of disposable income?
B. What will be the new level of savings?
Chapter 10 Solutions
Macroeconomics
Ch. 10.2 - Prob. 1QQCh. 10.2 - Prob. 2QQCh. 10.2 - Prob. 3QQCh. 10.2 - Prob. 4QQCh. 10.5 - Prob. 1QQCh. 10.5 - Prob. 2QQCh. 10.5 - Prob. 3QQCh. 10.5 - Prob. 4QQCh. 10 - Prob. 1DQCh. 10 - Prob. 2DQ
Ch. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - Prob. 5DQCh. 10 - Prob. 6DQCh. 10 - Prob. 7DQCh. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - Prob. 1RQCh. 10 - Prob. 2RQCh. 10 - Prob. 3RQCh. 10 - Prob. 4RQCh. 10 - Prob. 5RQCh. 10 - Prob. 6RQCh. 10 - Prob. 7RQCh. 10 - Prob. 8RQCh. 10 - Prob. 9RQCh. 10 - Prob. 1PCh. 10 - Prob. 2PCh. 10 - Prob. 3PCh. 10 - Prob. 4PCh. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7PCh. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Prob. 10P
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- The following table provides data for output (real GDP) and saving. a. Fill in the missing numbers (gray-shaded cells) in the table. Instructions: In the table, enter your answers for consumption as a whole number. Round your answers for APC and APS to 3 decimal places. Round your answers for MPC and MPS to 1 decimal place. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Level of Output and Income (GDP = DI) Consumption Saving АРС APS MPC MPS 496 -0.033 -0.015 $480 $-16 1.033 520 528 -8 1.015 560 560 1.000 0.000 592 624 600 0.987 0.013 640 16 0.975 0.025 680 656 24 0.965 0.035 720 688 32 0.956 0.044 760 720 40 0.947 0.053 800 752 48 0.940 0.060arrow_forwardFind the equilibrium level of GDP (income or V) demanded in an economy in which investment (1) is always $300, net exports (X-IM) are always - 550, government expenditures (G) and taxes (T) are each equal to $400, and the consumption function is described by the following algebraic equation: C = 150 + 0.75Dl DI is disposable income. How much saving (5) is there at the equilibrium level of income. Hint: (1) Dl = Y (national income or GDP) minus taxes (Y-T) (2) Income (Y) not consumed (C) must be saved (S). This means that S = Y-C. (3) to answer this you have to set Y=AE or Y=C+1+G (X-IM), and solve for Y. Then you have to solve for S.arrow_forwardMacroeconomics Question No.2 Suppose the consumption function is given by C = 100 + 0.8YD and that I = 50, while G=200, TR=62.5 and t=0.25. What is the equilibrium level of income? What is the level of saving in equilibrium? If investment were to rise to 150, what would be the effect be on equilibrium income. What is the value of multiplier in part a. and c. Draw a diagram indicating the equilibrium in part a. and c.arrow_forward
- Assume the following consumption schedule: C= 20 + 0.9 Y, where C is consumption and Y is disposable income. At $1,100 level of disposable income: (show your cacuators) a. Find out the level of saving and consumption? b. How much are the APC and APS (to one decimal place)? c. If dispr able income increased to $2,800 and saving is $345 now. What are MPC and MPŚ (to two decimal places)?arrow_forward6. You are given the following consumption function : C = RM150 million + 0.75Yd Based on the above consumption function, answer the following questions: a. Determine the saving function How much is : b. 1. Autonomous consumption II. Autonomous saving C. How much is the disposable income when saving is zero? d. If there an investment of RM200 million, what will be the new equilibrium level of income. e. If G = 100, calculate the new equilibrium level if government expenditure increased from RM100 to RM150 f. If I = 100, calculate the new equilibrium level if investment decrease to RM50arrow_forwardFrom the information above, calculate the level of consumption and saving that occurs at the equilibrium level of income.arrow_forward
- The accompanying graph represents the aggregate consumption function for the small island nation of Pineapple Paradise. The people of Pineapple Paradise expect their future disposable income to increase. Use the graph to show an increase in consumption expenditures. What is the new level of aggregate autonomous consumer spending? 1 $1000 2 $3000 3 $2000 4 $4000arrow_forwardAssume taxes are zero and an economy has a consumption function of C = 0.80 (Yd) + $879.06. How much savings take place if disposable income is equal to 3,258.02? Round your answer to two digits after the decimal and include a negative sign if you find negative savings which is borrowing.arrow_forwardI consumed all my income at every level of income.Draw my consumption and saving function.What are my MPC and MPS? Explain why it must always be true that MPC+MPS equal to 1?arrow_forward
- 5. Graphing the saving and consumption functions from MPC Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.5. That is, if disposable income increases by $1, consumption increases by 50¢. Suppose further that last year, disposable income in the economy was $300 billion and consumption was $250 billion. Based on these data, use the blue line (circle symbols) to plot this economy's consumption function on the following graph. REAL CONSUMER SPENDING (Billions of dollars) 700 600 500 400 300 200 100 0 Aa Aa -100 Consumption Fn. O O 0 100 200 300 400 500 600 700 800 REAL DISPOSABLE INCOME (Billions of dollars) Help Clear All Suppose that this year, disposable income is projected to be $340 billion. Based on your analysis, you would expect consumption to be and saving to bearrow_forward4.5 You are given the following data concerning Freedonia, a legendary country: (1) Consumption function: C = 200 + 0.8Y (2) Investment function: I = 100 (3) AE = C + I (4) AE = Y a. What is the marginal propensity to consume in Freedonia, and what is the marginal propensity to save? b. Graph equations (3) and (4) and solve for equilibrium income. c. Suppose equation (2) is changed to (2´) I = 110. What is the new equilibrium level of income? By how much does the $10 increase in planned investment change equilib- rium income? What is the value of the multiplier? d. Calculate the saving function for Freedonia. Plot this sav- ing function on a graph with equation (2). Explain why the equilibrium income in this graph must be the same as in part b.arrow_forwardassume you are given a $100 raise, and decide to save $20 of that money. also assume that if you make zero income in a year, you will still spend $7000. a.) what is your consumption function? b.) if you earn $20000 in a year how much will you spend? c.) will you be able to save while earning the above income?arrow_forward
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