On a graph of a consumption function, what is the significance of the 45-degree line? O a. It connects all points where desired consumption equals actual disposable income. O b. It connects all points where desired consumption equals desired expenditure. O c. Desired consumption is zero at all points along the 45-degree line. O d. It connects all points where desired consumption equals desired saving. O e. It shows the slope of the average consumption function, against which we measure other consumption fiunctions

On a graph of a consumption function, what is the significance of the 45-degree line? O a. It connects all points where desired consumption equals actual disposable income. O b. It connects all points where desired consumption equals desired expenditure. O c. Desired consumption is zero at all points along the 45-degree line. O d. It connects all points where desired consumption equals desired saving. O e. It shows the slope of the average consumption function, against which we measure other consumption fiunctions

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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9. Suppose Dina calculates her permanent income by adaptive expectations. Year 2010 Dina's permanent income was 68,000, and year2011 actual income is 71,000. Assume that, long-run marginal to consume is 0.90 and short-run marginal propensity to consume is 0.18. What is her consumption expenditure year 2011? * O 51,740 O 41,740 O 59,500 O 44,750 none of the above is correct
If consumption is $30,000 when income is $40,000, and consumption increases to $34,000 when income increases to $45,000, the MPC is Select one: O a. None of the options O b. 0.8 O c. 0.2 O d. 0.4
Assuming the equilibrium condition is Y = C+1. Suppose S = -600 + 0.4Y, and I = 800. If income is presently at $4500 we can say that, ceteris paribus, a. national income will decrease toward equilibrium b. consumption will decrease. O C. national income will rise toward equilibrium. O d. national income is in equilibrium.
If Michelle's income is reduced to zero after she loses her job, her consumption will be and her saving will be O greater than zero; greater than zero O less than zero; greater than zero O greater than zero; less than zero O less than zero; less than zero
Question 7 If the MPC in the economy is 0.75, govemment could shift the aggregate demand curve rightward by $30 billion by cutting taxes by $10 billion. O A. true. O B. false.
Figure 7.1 C b. 100 In Figure 7.1, all of the following is true except: An additional dollar of income always induces some additional consumption. O There is some level of consumption that is independent of income. O The marginal inclination to consume is greater than zero. O At zero income there is zero consumption.
When planned aggregate expenditure is less than real GDP, as in the diagram to the right, what happens to firms' inventories? OA. Inventories fall as firms increase output. O B. Inventories accumulate as firms increase production. O C. Inventories fall if production is not scaled back. O D. Inventories accumulate if production is not scaled back. Real Aggregate Expenditure, AE ($100 billions) 100- 90- 80- 60- 50- 40- 30- 20- 10- 'Y = AE 45° 10 20 30 40 50 60 70 80 90 100 Real GDP, Y ($100 billions)
All of the following are true when there is an unplanned decrease in inventories, except: O a. Actual investment is greater than planned investment O b. Real GDP will be rising O c. GDP is less than aggregate expenditures O d. Saving is less than planned investment
Suppose two successive levels of disposable personal income are $13.8 and $18.8 billion, respectively, and the change in consumption spending between these two levels of disposable personal income is $3.65 billion, then the MPS will be equal to O 0.25 O 0.27 O 0.35 O 0.65 O 0.73
ADVANCED ANALYSIS Assume that the consumption schedule for a private closed economy is such that consumption is: C = 100 + 0.75Y Assume further that planned investment Ig is independent of the level of real GDP and constant at Ig = 50. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig Instructions: Enter your answers as whole numbers.a. Calculate the equilibrium level of income or real GDP for this economy. Equilibrium GDP (Y) = $ . b. What happens to equilibrium GDP if Ig changes to 60? Equilibrium GDP (Y) = $ . What does this outcome reveal about the size of the spending multiplier? Spending multiplier = .
Aggregate planned expenditure Select one: O a. equals actual aggregate expenditure at the equilibrium level of real GDP. O b. is always greater than actual aggregate expenditure. O c. is always less than actual aggregate expenditure. O d. always equals actual aggregate expenditure.
Refer to the information provided in Figure below to answer the question(s) that follow. C3 C2 45° Y2 Aggregate income Figure Refer to Figure above. If income is Y1, aggregate consumption is the greatest when the aggregate consumption function is O C. O C3. O cannot be determined from the figure. Aggregate saving