Step 2: The Effect of Saving on Total ExpendituresThe following table shows data for the economy before the decrease in saving. Suppose that the decrease in saving causes consumption to risefrom $280 million to $320 million. Assume Say's law holds in this economy.Fill in the data for the economy after the decrease in saving.Before Saving Decrease$280 million$200 million$250 million$500 million$300 millionConsumption (C)Investment (I)Government Purchases (G)Exports (EX)Imports (IM)As a result of the decrease in saving, total expenditures willAfter Saving Decrease$320 millionmillionmillion$500 million$300 million

To fill in the data for the economy after the decrease in saving, we need to understand the impact…

The following table shows data for the economy before the decrease in saving. Suppose that the decrease in saving causes consumption to rise from $280 million to $320 million. Assume Say's law holds in this economy. Fill in the data for the economy after the decrease in saving. Consumption (C) Investment (I) Government Purchases (G) Exports (EX) Imports (IM) Before Saving Decrease $280 million $200 million $250 million $500 million $300 million As a result of the decrease in saving, total expenditures will After Saving Decrease $320 million $ $ million million $500 million $300 million

The following table shows data for the economy before the decrease in saving. Suppose that the decrease in saving causes consumption to rise from $280 million to $320 million. Assume Say's law holds in this economy. Fill in the data for the economy after the decrease in saving. Consumption (C) Investment (I) Government Purchases (G) Exports (EX) Imports (IM) Before Saving Decrease $280 million $200 million $250 million $500 million $300 million As a result of the decrease in saving, total expenditures will After Saving Decrease $320 million $ $ million million $500 million $300 million

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Exercise 4. Imports and the multiplier. The consumption multiplier tries to capture the idea that individuals increase their consumption expenditures when their income increases, even when it is only a short-term increase and their life time income didn't change. However, individuals not only consume domestic products but also, they import part of their consumption. Therefore, if domestic consumption reacts to changes in current income, then it is natural to think that consumption of foreign goods should increase as well. For example, when the economy is booming, imports usually rise. To incorporate this channel into the model, suppose the import equation is given by Mt =āmīt + xm Ỹt Ỹt are described by equations in the previous exercise It = āƒŸt — b(R₁ − ñ) Yt, Ct =ācīt + x Ỹt Ỹt. The other categories of expenditures follow the same rules as in class. a) Derive the IS curve for this new specification. b) What is the economic explanation for why the parameter xm shows up in the…
The following questions refer to this table:
An increase in savings implies a decrease in consumption and therefore a decrease in GDP.True/False and Explain .
Which of the following correctly describes how a decrease in the price level affects consumption spending? Select one: a. A decrease in the price level raises real wealth, which causes consumption to increase. b. A decrease in the price level decreases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase. c. A decrease in the price level increases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase. d. A decrease in the price level lowers real wealth, which causes consumption to decrease.
am. 201.
3. If the current equilibrium GDP value is $925,000 and investment spending decreases by $25,000 with an MPC of 0.8, solve for the new equilibrium GDP.
4
Sa = -5000 and mpc or c = 0.8 Formulate the consumption function & interpret the function. Formulate the savings function & interpret the function.
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