Macroeconomics (Book Only)
12th Edition
ISBN: 9781285738314
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 10, Problem 7QP
To determine
Autonomous consumption and the induced consumption.
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In the simple Keynesian consumption function C = 84 +0.83*Y^d, what is the marginal propensity to consume (MPC) equal to?
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;
According to Keynes's Consumption function,
a) Consumption spending is a function of disposable (after-tax) income (Yd).
b) There cannot be any consumption without disposable income.
c) Total consumption spending is composed of autonomous consumption, independent of income (Ca), and induced consumption, determined by disposable income.
d) The induced consumption component is equal to a constant proportion of disposable income.
e) The induced consumption is equal to the marginal propensity to consume times disposable income
f) The consumption function Is modified in the Lecture Notes to a simplified version where consumption is a function of real income.
g) Autonomous consumption cannot be changed by other factors.
Chapter 10 Solutions
Macroeconomics (Book Only)
Ch. 10.1 - Prob. 1STCh. 10.1 - Prob. 2STCh. 10.1 - Prob. 3STCh. 10.2 - Prob. 1STCh. 10.2 - Prob. 2STCh. 10.2 - Prob. 3STCh. 10.3 - Prob. 1STCh. 10.3 - Prob. 2STCh. 10.3 - Prob. 3STCh. 10.4 - Prob. 1ST
Ch. 10.4 - Prob. 2STCh. 10 - Prob. 1VQPCh. 10 - Prob. 2VQPCh. 10 - Prob. 3VQPCh. 10 - Prob. 4VQPCh. 10 - Prob. 5VQPCh. 10 - Prob. 1QPCh. 10 - Prob. 2QPCh. 10 - Prob. 3QPCh. 10 - Prob. 4QPCh. 10 - Prob. 5QPCh. 10 - Prob. 6QPCh. 10 - Prob. 7QPCh. 10 - Prob. 8QPCh. 10 - Prob. 9QPCh. 10 - Prob. 10QPCh. 10 - Prob. 11QPCh. 10 - Prob. 12QPCh. 10 - Prob. 13QPCh. 10 - Prob. 14QPCh. 10 - Prob. 15QPCh. 10 - Prob. 16QPCh. 10 - Prob. 17QPCh. 10 - Prob. 18QPCh. 10 - Prob. 19QPCh. 10 - Prob. 20QPCh. 10 - Explain how to derive a total expenditures (TE)...Ch. 10 - Prob. 22QPCh. 10 - Prob. 23QPCh. 10 - Prob. 24QPCh. 10 - Prob. 25QPCh. 10 - Prob. 1WNGCh. 10 - Prob. 2WNGCh. 10 - Prob. 3WNGCh. 10 - Prob. 4WNGCh. 10 - Prob. 5WNGCh. 10 - Prob. 6WNGCh. 10 - Prob. 7WNGCh. 10 - Prob. 8WNG
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- Explainarrow_forwardIn 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?arrow_forwardConsider an economy that is described by the following: Autonomous consumption = 100 Autonomous investment = 100 Marginal propensity to consume = 0.75 a. What is the consumption function of this economy? b. Derive the equilibrium income of this economy? c. How large is the change in the equilibrium income if investment rises to 200?arrow_forward
- Use the Keynesian Model to answer this set of questions. Suppose that in the economy under consideration the consumption function can be written as C=200+.8(Y-T). Furthermore, you know that taxes are autonomous and equal to $10. Now, suppose that investment spending is equal to $50 at every level of disposable income and government spending is constant and equal to $100 at every level of disposable income, suppose that (X-M) is constant and equal to $20 at every level of disposable income. (a)Draw a graph of the consumption function with respect to disposable income. Measure/show consumption spending on the vertical axis and disposable income on the horizontal axis (b) Calculate equilibrium national income Y, from the information given. (c) From the information given above is the government running a deficit or surplus budget? Explain why. (d) Full employment output in this economy (Y) is equal to $2000 what do you predict is happening to inventories if the full employment level of…arrow_forwardConsider an economy described by the following:Autonomous consumption ( a ) = 100Autonomous Investment = 100Marginal propensity to consume = 0.75 2. What is the consumption function for this economy?arrow_forwardWhat is the consumption function? What is the marginal propensity to consume? What does an upward-sloping consumption function mean?arrow_forward
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