Question 1

Suppose that the linear equation for consumption in a hypothetical economy is C = 50 + 0.9 Y.Also suppose that income (Y)is $400.Determine the following: (a)MPC; (b)MPS; (c)level of consumption; (d)APC; (e)APS.

Accepted Answer

(a)MPC = 0.9.(b)MPS = 0.1.(c)At Y = $400,C = $410.(d)At Y = $400,APC = $410/$400 = 1.025.(e)At Y = $400,APS = -$10/$400 = -0.025.

Question 2

Explain the difference between a movement along the consumption schedule and a shift in the consumption schedule.

Accepted Answer

A movement from one point to another on the consumption schedule is a change in the amount consumed.It is caused solely by a change in disposable income.By contrast,a shift in the consumption schedule is the result of a change in one of the non-income determinates of consumption such as a change in wealth,expectations,borrowing,or real interest rates.If a household decided to consume more at each level of disposable income,the consumption schedule will shift upward.

Question 3

Complete the following table assuming that (a)MPS = 1/3, (b)there is no government and all saving is personal saving.

Accepted Answer

The answer of Complete the following table assuming that (a)MPS...

Question 4

Describe the relationship shown by the investment demand curve.

Accepted Answer

The answer of Describe the relationship shown by the investment...

Question 5

Explain how consumption and saving are related to disposable income.

Accepted Answer

The answer of Explain how consumption and saving are related...

Question 6

Complete the following table assuming that (a)MPS = 1/5, (b)there is no government and all saving is personal saving.

Accepted Answer

The answer of Complete the following table assuming that (a)MPS...

Question 7

What is the effect of increase in wealth on the consumption and saving schedules?

Accepted Answer

The answer of What is the effect of increase in...

Question 8

Describe the relationship between the Great Recession of 2008-2009 and the Investment Riddle.

Accepted Answer

The answer of Describe the relationship between the Great Recession...

Question 9

State four factors that explain why investment spending tends to be unstable.

Accepted Answer

The answer of State four factors that explain why investment...

Question 10

Differentiate between the average propensity to consume and the marginal propensity to consume.

Accepted Answer

The answer of Differentiate between the average propensity to consume...

Question 11

Suppose a family's annual disposable income is $8,000 of which it saves $2,000.
(a)What is their APC?
(b)If their income rises to $10,000 and they plan to save $2,800,what are their MPS and MPC?
(c)Did the family's APC rise or fall with their increase in income?

Accepted Answer

The answer of Suppose a family's annual disposable income is...

Question 12

Use the following data to answer the questions.

Accepted Answer

The answer of Use the following data to answer the...

Question 13

What are the marginal propensity to consume (MPC)and marginal propensity to save (MPS)? How are the two concepts related? How are the two concepts related to the consumption and saving functions?

Accepted Answer

The answer of What are the marginal propensity to consume...

Question 14

Describe the relationship between the Great Recession of 2008-2009 and the Paradox of Thrift.

Accepted Answer

The answer of Describe the relationship between the Great Recession...

Question 15

Define the consumption and saving schedules.

Accepted Answer

The answer of Define the consumption and saving schedules....

Question 16

Complete the accompanying table.

Accepted Answer

The answer of Complete the accompanying table....

Question 17

List six events that could cause a shift in the investment demand curve to the right.

Accepted Answer

The answer of List six events that could cause a...

Question 18

List four factors that could shift the current consumption schedule.

Accepted Answer

The answer of List four factors that could shift the...

Question 19

Use the graphs below to answer the following questions:

Accepted Answer

The answer of Use the graphs below to answer the...

Question 20

Complete the accompanying table.

Accepted Answer

The answer of Complete the accompanying table....

Quiz 10: Basic Macroeconomic Relationships

Suppose that the linear equation for consumption in a hypothetical economy is C = 50 + 0.9 Y.Also suppose that income (Y)is $400.Determine the following: (a)MPC; (b)MPS; (c)level of consumption; (d)APC; (e)APS.

Explain the difference between a movement along the consumption schedule and a shift in the consumption schedule.

Complete the following table assuming that (a)MPS = 1/3, (b)there is no government and all saving is personal saving.

Describe the relationship shown by the investment demand curve.

Explain how consumption and saving are related to disposable income.

Complete the following table assuming that (a)MPS = 1/5, (b)there is no government and all saving is personal saving.

What is the effect of increase in wealth on the consumption and saving schedules?

Describe the relationship between the Great Recession of 2008-2009 and the Investment Riddle.

State four factors that explain why investment spending tends to be unstable.

Differentiate between the average propensity to consume and the marginal propensity to consume.

Suppose a family's annual disposable income is $8,000 of which it saves $2,000. (a)What is their APC? (b)If their income rises to $10,000 and they plan to save $2,800,what are their MPS and MPC? (c)Did the family's APC rise or fall with their increase in income?

Use the following data to answer the questions.

What are the marginal propensity to consume (MPC)and marginal propensity to save (MPS)? How are the two concepts related? How are the two concepts related to the consumption and saving functions?

Describe the relationship between the Great Recession of 2008-2009 and the Paradox of Thrift.

Define the consumption and saving schedules.

Complete the accompanying table.

List six events that could cause a shift in the investment demand curve to the right.

List four factors that could shift the current consumption schedule.

Use the graphs below to answer the following questions:

Complete the accompanying table.