Question

Income C APC S APS 0 ? -- ? -- 100 ? ? ? ? 200...

Income

C

APC

S

APS

0

?

--

?

--

100

?

?

?

?

200

?

?

?

?

300

?

?

?

?

400

410

?

?

?

500

500

?

?

?

600

590

?

?

?

700

680

?

?

?

Fill in the missing data wherever there is a question mark.                             (20 points)

2.Find the MPC and MPS for the above data. Show work!                               (10 points)

3.What is autonomous consumption in the above data? What is the formula for the consumption function in this specific case (use relevant numbers from #1)?     (20 points)

4.A firm expects to earn $14,000 a year on an $112,000 investment.

a)Calculate the expected profit rate. Show work                            (10 points)

b)This firm would be willing to make this investment provided the interest rate is lower than what?                                                                               (10 points)

Answer True or False for each of the following.        (3 points each)

When you buy 100 shares of IBM it is an investment according to economists.

If consumers have few durable goods, this will lower the C line, all other things equal.

A corporation is a legal person separate from the owners.

Investment is more stable than consumption.

Consumption is about 2/3 of overall spending each year in the US.

Net investment is gross investment minus depreciation.

High interest rates discourage business investment, all other things equal.

A bond holder is a part owner of a company.

High consumer debt would lower the C line, all other things equal.

Income is the largest determinant of consumption.

Homework Answers

Answer #1
Income C APC S APS
0 50 -- -50 --
100 140 1.40 -40 -0.40
200 230 1.15 -30 -0.15
300 320 1.07 -20 -0.07
400 410 1.03 -10 -0.03
500 500 1.00 0 0.00
600 590 0.98 10 0.02
700 680 0.97 20 0.03

2.

MPC = Change in consumption due to the change in income

When income increases to 100,

Then

MPC = (140-50)/(100-0) = .9

MPC = .9

MPS = 1- MPC = 1-.9

MPS = .1

3.

Autonomous consumption = consumption that is independent of the income

Autonomous consumption (A) = 50

As per the data in the table of Q.1

Consumption = A + MPC*Y

Consumption = 50 + .9*Y

Pl. repost other unanswered questions for their proper answers!

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Disposable Income Yd Consumption C $2,000 $2,040 2,100 2,120 2,200 2,200 2,300 2,280 2,400 2,360 Using...
Disposable Income Yd Consumption C $2,000 $2,040 2,100 2,120 2,200 2,200 2,300 2,280 2,400 2,360 Using the table provided calculate the following for each level of disposable income: Change in disposable income Change in consumption Saving Change in saving MPC MPS The multiplier Show your work if possible. I suggest that you build a table containing the information requested. This question is worth 7 points. All other questions are worth one point each. 2. The classical economists believed __________ determined...
Consumers change their purchases and move ALONG the same consumption function when: Their income changes Their...
Consumers change their purchases and move ALONG the same consumption function when: Their income changes Their tastes change The price level changes All of the above.       12) If MPC is .75 then if consumer income rises by $10,000 we would predict that consumption will: A. rise by $7500 while savings fall by $2500. B. fall by $2500 while savings rise by $7500. C. rise by $7500 while savings rise by $2500. D. fall by $2500 while savings fall by...
QUESTION 1 What should be done to maximize shareholder wealth and thus the value of the...
QUESTION 1 What should be done to maximize shareholder wealth and thus the value of the firm? a. Raise the free cash flows of the business. b. Decrease the size of expected cash flow of the company. c. Slow down the cash receipt of the organization. d. Increase the risk level of the firm. 1 points    QUESTION 2 Which statement about financial statements is correct? a. The balance sheet gives us a picture of the firm’s financial position at...
QUESTION 21 One implication of the tradeoff theories of capital structure decision is that firms that...
QUESTION 21 One implication of the tradeoff theories of capital structure decision is that firms that are likely to pay taxes at high rates should carry more debt than firms in lower tax brackets. True False 1.00000 points    QUESTION 22 One implication of the tradeoff theories of capital structure decision is that risky firms, as measures by the variability of asset returns, ought to borrow more, other things equal. True False 1.00000 points    QUESTION 23 The pecking order...
QUESTION 7 Suppose Peter expects to receive $5,000 three years from today. If the interest rate...
QUESTION 7 Suppose Peter expects to receive $5,000 three years from today. If the interest rate is 4 percent, the present value of $5,000 is approximately _____. a. $5,025 b. $4,500 c. $4,762 d. $3,429 e. $4,445 5 points    QUESTION 8 If you own a perpetuity of $500 and if the interest rate is 4 percent, then its present value:​ a. ​is $2,000. b. ​cannot be determined unless the number of years is known. c. ​is infinite. d. ​is...
A thumbs up will be given: Table 1 t A B C D 0       (14,900,000)...
A thumbs up will be given: Table 1 t A B C D 0       (14,900,000)       (17,900,000)       (16,600,000)        (19,700,000) 1          4,980,000          5,990,000          3,850,000           6,400,000 2          4,980,000          6,210,000          4,990,000           5,880,000 3          4,510,000          6,250,000          6,860,000           6,800,000 4          4,510,000          4,700,000          4,990,000           6,650,000 Risk High Average Low Average Table 1 shows the expected after-tax operating cash flows for each project. All projects are expected to...
For an individual with a net income of $50,000, a tax liability of $10,704.50 and a...
For an individual with a net income of $50,000, a tax liability of $10,704.50 and a 29% marginal tax rate? ____ The average tax rate is 21.41% The average tax rate is 29.00% The average tax rate is undetermined, but less than the marginal tax rate The average tax rate is undetermined, but greater than the marginal tax rate A firm had an accounts receivable balance of $150 and $170 at the beginning and the end of the week, respectively....
53. Which of the following is the Fed’s most important policy interest rate? (a) federal funds...
53. Which of the following is the Fed’s most important policy interest rate? (a) federal funds rate; (b) the rate on 2-year Treasury notes; (c) the rate on 10-year Treasury notes; (d) the rate on 30-year fixed-rate mortgages. 54. In which market would a bank with excess reserves attempt to sell reserves to a bank with insufficient reserves? (a) Treasury bill market? (b) federal funds market; (c) bond market; (d) NASDAQ. 55. When compared with monetarist theory, Keynesian theory places...
Classify the following changes in each of the accounts as either an outflowor an inflowof cash....
Classify the following changes in each of the accounts as either an outflowor an inflowof cash. (1 Mark – 0.2 each)    Is a decrease in land and buildings an inflow or an outflow of​ cash? Is an increase in accounts payable an inflow or an outflow of​ cash? Is a decrease in vehicles an inflow or an outflow of​ cash? Is an increase in accounts receivable an inflow or an outflow of​ cash? Is the payment of dividends an...
Background: Australian Dyes Pty Ltd manufactures high quality dyes for textiles and exports to Europe. The...
Background: Australian Dyes Pty Ltd manufactures high quality dyes for textiles and exports to Europe. The Indonesian government has invited Australian Dyes to open a manufacturing plant in Indonesia so imported dyes can be replaced by local production. If Australian Dyes makes the investment it will operate the plant for five years and then be required to sell the business as a going concern to Indonesian investors at the end of the fifth year. Australian Dyes believes a multiple of...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT