3. Consumption function and non-income determinants The following graphs show an economy's initial position at point A along its consumption function (C). Suppose there is a decrease in the interest rate households pay for items bought on credit, such as cars or housing. On the graph, shift either the consumption curve or the initial point on the consumption function to show the impact of a decrease in the interest rate. (Note: In the scenario where the curve shifts, only shift the curve and do not adjust the position of the point.) RE AL CONSUMPTION (Billions of dollars) с REAL DISPOSABLE INCOME (Billions of dollars) Now suppose that disposable income increases. A On the following graph, shift either the consumption curve or the initial point on the consumption function to show the impact of an increase in disposable income. (Note: In the scenario where the curve shifts, only shift the curve and do not adjust the position of the point.)

3. Consumption function and non-income determinants The following graphs show an economy's initial position at point A along its consumption function (C). Suppose there is a decrease in the interest rate households pay for items bought on credit, such as cars or housing. On the graph, shift either the consumption curve or the initial point on the consumption function to show the impact of a decrease in the interest rate. (Note: In the scenario where the curve shifts, only shift the curve and do not adjust the position of the point.) RE AL CONSUMPTION (Billions of dollars) с REAL DISPOSABLE INCOME (Billions of dollars) Now suppose that disposable income increases. A On the following graph, shift either the consumption curve or the initial point on the consumption function to show the impact of an increase in disposable income. (Note: In the scenario where the curve shifts, only shift the curve and do not adjust the position of the point.)

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter9: Aggregate Demand

Section: Chapter Questions

Problem 1.3P

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