Q.1.7 In the Keynesian macroeconomic model, the equation for the savings function is given as: S = -420 + 1/4Y. Based on this information, which of the following statements is correct? (1) The marginal propensity to consume is 1/4; (2) The marginal propensity to save is -420;

Q.1.7 In the Keynesian macroeconomic model, the equation for the savings function is given as: S = -420 + 1/4Y. Based on this information, which of the following statements is correct? (1) The marginal propensity to consume is 1/4; (2) The marginal propensity to save is -420;

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

The Keynesian multiplier relationship Y = 1/ (1-c) is derived from two initial equations: Y = C + I and C= cY. For the multiplier relationship to be acceptable, a. the initial two equations must be acceptable b. saving must be negative c. the algebraic derivation must be correct d. all individuals must receive the same income
Consider the following income/expenditure diagram in the simple Keynesian model. If taxes, T, were increased, then Group of answer choices A) The Y = C+S+T line would shift to the right, and equilibrium Y would increase. B) the C+I+G line would shift downward, and equilibrium Y would decrease. C) The Y = C+S+T line would shift to the left, and equilibrium Y would decrease. D) neither of the lines would shift, and equilibrium Y would stay the same. E) the C+I+G line would shift upward, and equilibrium Y would increase.
If consumption is $5 billion when disposable income is $0, and if the marginal propensity to consume is 0.70, find the national consumption function C(y) (in billions of dollars). C(y)
11
. You are given the following data concerning Freedonia, a new republic. 1) Consumption is 200 when income is zero and the marginal propensity to consume is 0.6 out of every dollar increase in income 2) Investment function: I = 200 3) AE ≡ C + I 4) AE = Y A. Derive the savings function? B. Suppose equation 2) is changed to I = 150. What is the new equilibrium level of income (Y)? By how much does the $50 decrease in planned investment change equilibrium income? What is the value of the tax multiplier? C. Plot the savings function from a. on a graph with equation 2).
Your average propensity to consume is the percentage of each dollar of income, on the average, that is spent for current needs rather than savings. True False
The Simple Keynesian Model (i.e., the income-expenditure model). Assume: C = 150 + 0.9 DI I = 50 DI = C + I in equilibrium for a 2-sector model (Note: DI = C in a 1-sector model) Define the term, consumption. What is the value of “autonomous” consumption (also called “a” or the vertical intercept)? What is the value of the slope (also referred to as “b”) of the consumption function? There’s another name for the slope of the consumption function. What is it? What is the value of DI when the model is in equilibrium? What is the value of the “oversimplified” expenditure multiplier? If full-employment means that DI = $5000, then how much should autonomous consumption (or autonomous investment) increase to achieve full-employment? (Hint: Use the multiplier process formula.) Draw a graph of this 2-sector model. Indicate equilibrium DI, full-employment DI, as well as…
When income is zero within the Keynesian cross model planned expenditure will be greater than zero and the intercept of the consumption function will hence not be zero either. The reason for this feature of the model is that either: The Marginal Propensity to Save (MPS) is greater than 0.5 The Marginal Propensity to Consume (MPC) is greater than 0.5 Autonomous consumer expenditure depends only on the level of national income Autonomous consumer expenditure does not depend on the level of national incomeOnly one answer can be correct. Please pick one and explain your reasoning.
Suppose that the marginal propensity to save is dS = 0.29 dy (in billions of dollars) and that consumption is $8.9 billion when disposable income is $0. Find the national consumption function. C(y) =
Given a consumption function of C= $25 +0.75 YD, if disposable income is $1,000, then the average propensity to consume equals Multiple Choice 1.0. 0.6. 1.6. 0.4.
In the Keynesian cross model, assume that the consumption function is given by C = 20 + 0.8(Y- T). Planned investment is 200; government purchases and taxes are both 400. There is no foreign trade. An economist has claimed that the full employment level of output is 2,400. How much should the government expenditure or taxes rise or fall to achieve full employment?
In the Keynesian cross model, assume that the consumption function is given by C = $220 + 0.7(Y – T) Planned investment is $50; government purchases and taxes are both $100. d. What level of government purchases is needed to achieve an income of $1080? Assume taxes remain at $100. G=$ e. What level of taxes is needed to achieve an income of $1080? Assume government purchases remain at S100.