Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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Chapter 11, Problem 11CQ
To determine
Impact of saving and spending of households in the economy.
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In an economy, the ratio of Average Propensity to be
Consume and Average Propensity to Save is 5:3.
The level of income is 6,000. How much are the
savings? Calculate.
If there is an increase in the personal income tax rate, and people do not receive a pay increase, then disposable income will... decrease or increase
Therefore, we can expect consumption spending to... decrease or increase
and private saving to..... increase or decrease .
Which of the following would be most likely to increase consumption spending?
Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.
a
A reduction in consumer credit card debt
b
A drop in stock prices
c
A higher interest rate
d
The expectation of lower future prices
Chapter 11 Solutions
Economics: Private and Public Choice
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- According to the life-cycle income hypothesis, if the retirement age increases but life expectancy decreases: a. consumption increases and savings increase b. consumption increases and savings might increase or decrease c. consumption decreases and savings decrease d. consumption decreases and savings might increase or decrease e. consumption might increase or decrease and savings decreasearrow_forwardVery briefly summarize the relationships shown by (a) the consumption schedule, (b) the saving schedule, (c) the investment demand curve, and (d) the multiplier effect. Which of these relationships are direct (positive) relationships and which are inverse (negative) relationships? Why are consumption and saving in the United States greater today than they were a decade ago?arrow_forwardWhich of the following would be most likely to increase consumption spending? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a A reduction in consumer credit card debt b A drop in stock prices A higher interest rate d The expectation of lower future pricesarrow_forward
- 10. T/F/U. Fear of a recession causes a decrease in investment spending—I— which in turn impacts v. Draw a graph consistent with your answer.arrow_forwardThe following table shows income and consumption. Calculate: A- Saving (S), B- Marginal propensity to consume (MPC), C- Marginal propensity to save (MPS), D- Average propensity to consume (APC), E- Average propensity to save (APS). (show your calculations, write the answers to 2 decimal places) Y C S MPC MPS APC APS S = MPC = MPS = APC = APS = 300 360 410 400 600 510 800 250 1050 0.32arrow_forwardWhy does a downshift of the consumption schedule typically involve an equal upshift of the saving schedule? What is the exception to this relationship?arrow_forward
- Could you please help me with D part .arrow_forwardAn increase in savings implies a decrease in consumption and therefore a decrease in GDP.True/False and Explain .arrow_forwardTRUE OR FALSE WITH REASON. 9. Keynes believed that saving is less responsive to changes in income than to changes in interest rates. Answer: Reason: An increase in autonomous consumption, an increase in disposable income, or a decrease in the marginal propensity to consume can all increase consumption. 10. Answer: Reason:arrow_forward
- The table gives you information about the economy of Australia. Disposable income Saving Consumption expenditure (billions of dollars per year) 0 0 Calculate consumption expenditure at each value of disposable income and fill in the right column of the table. 100 25 200 50 Calculate the marginal propensity to consume. 300 75 The marginal propensity to consume is >>> Answer to 2 decimal places.arrow_forwardWhich 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.arrow_forwardWhat is the meaning of "animal spirits"? How do these relate to planned investment spending and to unplanned investment spending?arrow_forward
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