Question

2. Use the following consumption function data to answer the
questions next... **Keynesian Consumption Function**
(billions of dollars per year) Real disposable income Consumption
Saving MPC MPS $100 $150 $ 200 200 300 250 400 300 500 350
**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?** Tucker, Irvin
B.. Macroeconomics for Today (Page 231). South-Western College Pub.
Kindle Edition. (9th Edition)

Answer #1

The table below computes the required data

Real disposable income YD | Consumption C | Saving S = YD - C | MPC = ∆C/∆Yd | MPS=∆S/∆Yd |

100 | 150 | -50 | ||

200 | 200 | 0 | 0.5 | 0.5 |

300 | 250 | 50 | 0.5 | 0.5 |

400 | 300 | 100 | 0.5 | 0.5 |

500 | 350 | 150 | 0.5 | 0.5 |

a) The saving schedule is computed by the difference of income and consumption.

b) As mentioned, MPC is the ratio of change in consumption to change in disposable income. Similarly, MPS is the ratio of change in saving to change in disposable income

c) The break-even income is the one where saving is zero. This is equal to 200.

d) The relationship between the MPC and the MPS is given by MPS + MPC = 1.

4. Suppose that consumption C is the following function of
disposable income YD C = 200 + 0:8YD (a) What are the marginal
propensities to consume and save (MPC and MPS)? (b) Graph the
consumption function and the 45 degree line. (c) Solve for saving
or dissaving at levels of disposable income 300, 900, and 1300. (d)
Find the level of disposable income where savings equals zero.

C = 80 + 0.6Yd
1. Draw the consumption function
2. What is the value of consumption spending when the disposable
income equals zero?
3. What is the value of MPC?
4. What is the value of MPS?
5. What is the value of consumption spending when the disposable
income equals to 400?
6. What is the value savings when disposable income equals to
400?
7. Write the saving function
8. Draw the saving function

Use the table below to answer the following questions
Price level
Real GDP supplied (short run)
Real GDP demanded
100
550
600
110
575
575
120
600
550
130
625
525
Calculate short-run equilibrium and the price level
If potential GDP equals 625, what is the gap called and what is
the amount of the gap?
If potential GDP equals 550, what is the gap called and what is
the amount of the gap?
Use the table below to answer...

1.Which of the following is a true statement about the
multiplier? *
The multiplier effect does not occur when autonomous
expenditures decrease
The multiplier is a value between zero and one
The smaller the MPC, the larger the multiplier
The multiplier rises as the MPC rises
2.According to the Keynesian model of the macroeconomic, the
most effective means for closing a recessionary gap is *
Decrease in marginal tax rates which shift SRAS
Increases in government spending which shift AD...

3. Use the circular flow of income to answer the following
question. Assume a consumption function of the form, C=a+b(Y-T). If
the marginal propensity to consume is 9 and the government
increases taxes by $200, a. Explain (precisely) what happens to the
following variables. a) Public Saving b)Private Saving c) National
Saving

1. Which of the following marginal propensities to consume
results in the flattest consumption line in an aggregate
expenditures model? 0.4 0.8 1.0 0.5 2. What does the “paradox of
thrift” say? People who consume too much will go broke. An economy
that saves too much can end up with lower total savings. People who
save too little are harming the economy. Businesses that are greedy
will make the most profit. 3. The 45-degree line in the Keynesian
model represents...

Use the following macroeconomic model structure to answer the
questions followed. Please note that you must show your work of
estimations for these numerical multiple-choice questions for
gradable credit. Without showing your works of estimation, your
answers won’t be credible for take-home exam. 8 pts
C = 300 + 0.8Yd; C = consumption function; Yd (Y-T) = disposable
income I = 200; I = Investment
G = 400; G = Government expenditure
T = 200; T = Tax revenue
Also...

QUESTION 2
The following table shows the equilibrium level of a three-sector
economy.
National Income Taxes Disposable Income Consumption Savings
Investment Government Expenditure Aggregate Expenditure
100 50
200 125
300 200
400 275
500 350
600 425
700 500
800 575
Given:
Investment = RM25 million
Government expenditure= RM100 million
Taxes = RM100 million
a) Complete the table
b) Derive the consumption function and saving function
c) Calculate the equilibrium income level
d) Sketch the equilibrium income using the aggregate...

1.Consider the following consumption function and the national
income identity. C=0.01Y2 +0.8+200
Y=C+S
Where, C is consumption and Y is
national income, and S is saving
Calculate the value of marginal propensity to consume (MPC) when
Y=8
Find the expression for savings function and using that function
calculate marginal propensity to save (MPS) when Y= 8.
2. Consider the supply equation given below:
Q=7+0.1P + 0.004 P2
Find the price elasticity of supply if the current price is 80.
Is...

Short essay questions.
1. Describe the four phases of a complete business cycle. Use
graph to show the sequence of the four phases of a business
cycle.
2. Identify the economic and non-economic/social costs of
unemployment.
3. Based on their income, list three groups of people in the
society who are hurt more from unanticipated/unexpected inflation
than others.
4. Discuss how investment expenditure is affected by changes
in interest rate. Indicate their relationship.
II. Problem Solving Questions. Show your computations...

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