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 10.2, Problem 3QQ
To determine
MPC.
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Based on the above graph, which of the following is wrong?
Select one:
a. Saving is inversely (negatively) related to disposable income.
b. The marginal propensity to consume is constant at all levels of income and it is equal to the slope of the consumption schedule.
c. The marginal propensity to save rises as disposable income rises.
d. When consumption equals disposable income saving must be zero.
2. We have the following information on the economy:
- Aggregate consumption is $1,000 when aggregate
disposable income is zero.
- When aggregate disposable income is $17,500,
aggregate saving is $2,500.
a. Find the equation for the aggregate consumption
function.
b. The planned investment in this economy is $2,000.
Find the equation for the aggregate expenditure
function.
The multiplier is the ratio of the change in ________ to a change in ________.
Select one:
a. the level of saving; the level of consumption
b. autonomous consumption; induced consumption
c. the MPC; the MPS
d. the equilibrium level of output; some autonomous variable
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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Similar questions
- Suppose that disposable income, consumption, and saving in some country are $400 billion, $350 billion, and $50 billion, respectively. Next, assume that disposable income increases by $40 billion, consumption rises by $36 billion, and saving goes up by $4 billion. Instructions: In part a, round your answers to 2 decimal places. In part b, round your answers to 3 decimal places. a. What is the economy's MPC? MPC = What is its MPS? MPS = b. What was the APC before the increase in disposable income? APC before = What was the APC after the increase? APC after =arrow_forwardStep 2: The Effect of Saving on Total Expenditures The following table shows data for the economy before the decrease in saving. Suppose that the decrease in saving causes consumption to rise from $280 million to $320 million. Assume Say's law holds in this economy. Fill in the data for the economy after the decrease in saving. Before Saving Decrease $280 million $200 million $250 million $500 million $300 million Consumption (C) Investment (I) Government Purchases (G) Exports (EX) Imports (IM) As a result of the decrease in saving, total expenditures will After Saving Decrease $320 million million million $500 million $300 millionarrow_forwardCalculate the Marginal Propensity to Consume and the Marginal Propensity to Save. Fill in the blanks in the following table. Show that the MPC plus the MPS equals 1. National Income & Real GDP (Y) Consumption (C) Saving (S) MPC MPS $9,000 $8,000 $10,000 $8,600 $11,000 $9,200 $12,000 $9,800 $13,000 $10,400arrow_forward
- Which of the following statements is most accurate? a.Most of the variation in consumption spending can be explained by changes in debt b. There is no single factor that explains much of the variation in consumption spending c. Most of the variation in consumption spending can be explained by changes in the interest rate. d. Most of the variation in consumption spending can be explained by changes in wealth e. most of the variation in consumption spending can be explained by changes in disposable income.arrow_forwardAnswer the following questions concisely. Differentiate aggregate expenditure from consumption expenditure. What is disposable income? Explain the following: 1.Marginal propensity to consume 2.Induced expenditure 3.Savings 4.Life Cycle theory of Consumptionarrow_forwardAssume 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_forward
- GuldeLine Saving (2 National Income 1. Only one of the lines in this graph does not represent the savings function. It is: A. Line No. 1 B. Line No. 2 C. Line No. 3 D. Line No. 4 2. If the marginal propensity to consume increase which one of the following sentences represent the movement of the savings function. A. from Line No. 2 to line No. 1 B. from Line No. 3 to line No.2 C. from Line No. 2 to line No.3 D. from Line No. 4 to line No.3arrow_forwardAn increase in expected future income________. Select one: A. decreases consumption expenditure B. increases saving C. shifts the consumption function upward D. shifts the saving function upwardarrow_forward3. The following table shows income (Y) and consumption (C): Y C Calculate: 100 105 125 I. Marginal Propensity to Consume (MPC) II. Marginal Propensity to Save (MPS) 160 III. Average propensity to save (APS) 200 110 125 140arrow_forward
- 9. If the MPC is greater than zero but less than one, then we can be sure that when disposable income rises by P1 consumption will: a. not be affected b. will rise by more than P1 c. will rise by less than P1 d. will rise by exactly P1.arrow_forwardAutonomous consumption is: A. the level of consumption when disposable income is more that $40,000 a year B. the level of consumption when disposable income is 0 C. the level of consumption when all disposable income is saved D. the level of consumption when disposable income variesarrow_forwardGiven the consumption function C=$500bil + 0.8Y, an increase in disposable income from $6,000 billion to $7,000 billion will cause consumption to: A.increase by $1,000 bil. B.decrease by $800 bil. C.increase by $800 bil. D.decrease by $1,000.arrow_forward
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