The consumption function.

Question

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Answer 1

Question

Chapter 19, Problem 1QQ

To determine

The consumption function.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

According to the Keynesian consumption function, the saving rate in the economy increases as the income of the people increases. However, the data collected by Simon Kuznets reveals that the saving rate is stable. According to Keynes, the marginal propensity to consume is less than one and the average propensity to consume decreases as the income increases. This implies that as the income of people increases, the proportionate level of saving increases compared to the consumption. However, the studies conducted by Kuznets reveal that the average propensity to consume does not fall in the long run. This implies that the saving will not increase and hence it remains constant. Thus, option (b) is correct.

Option (a):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases. However, the studies conducted by Kuznets show that the saving rate is stable and it does not decrease in the long run. Thus, option (a) is incorrect.

Option (c):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable and it does not increase in the long run. Thus, option (c) is incorrect.

Option (d):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable. Thus, option (d) is incorrect.

Economics Concept Introduction

Savings: Savings is defined as that part of income that is not consumed in the current period and is to be used for future consumption.

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Students have asked these similar questions

Please answer questions D-H, I have already answered A , B,C but it may help you to still solve them yourself. Thank you!

2. A firm’s production function is given by:Q = 10KLThe unit capital and labour costs are 2 and 1 pounds respectively. The firm is contracted to produce2000 units.(a) Write out the optimisation problem of the firm. (b) Express this problem using a Lagrangian function. (c) Find values of K and L which fulfil the contract with minimal cost to the firm. (d) Calculate the total cost to the firm.

3. Consider the following estimated regression equation, estimated using a sample of firms, where RDis total firm spending on research and development in USD ($), Revenue is total firm revenuein USD ($), and W ages is the firms’ total spending on wages in USD ($) (standard errors inparentheses):RDd = 1000(600)+ 0.5(0.1)Revenue + 1.5(0.5)W ages,(a) Interpret the coefficients on each of the explanatory variables. (b) Which of the three coefficients are statistically significant at the 5% level of significance? Howdo you know? A researcher runs a two-sided statistical test of the null hypothesis that both the coefficients onthe explanatory variables above are jointly equal to 0.25 (mathematically, that β1 = β2 = 0.25),and reports a p-value of 0.045.(c) What does this p-value mean for the outcome of the test? (d) What would an appropriate two-sided alternative hypothesis look like?

Answer 2

Question

Chapter 19, Problem 1QQ

To determine

The consumption function.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

According to the Keynesian consumption function, the saving rate in the economy increases as the income of the people increases. However, the data collected by Simon Kuznets reveals that the saving rate is stable. According to Keynes, the marginal propensity to consume is less than one and the average propensity to consume decreases as the income increases. This implies that as the income of people increases, the proportionate level of saving increases compared to the consumption. However, the studies conducted by Kuznets reveal that the average propensity to consume does not fall in the long run. This implies that the saving will not increase and hence it remains constant. Thus, option (b) is correct.

Option (a):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases. However, the studies conducted by Kuznets show that the saving rate is stable and it does not decrease in the long run. Thus, option (a) is incorrect.

Option (c):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable and it does not increase in the long run. Thus, option (c) is incorrect.

Option (d):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable. Thus, option (d) is incorrect.

Economics Concept Introduction

Savings: Savings is defined as that part of income that is not consumed in the current period and is to be used for future consumption.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 19, Problem 1QQ

To determine

The consumption function.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

According to the Keynesian consumption function, the saving rate in the economy increases as the income of the people increases. However, the data collected by Simon Kuznets reveals that the saving rate is stable. According to Keynes, the marginal propensity to consume is less than one and the average propensity to consume decreases as the income increases. This implies that as the income of people increases, the proportionate level of saving increases compared to the consumption. However, the studies conducted by Kuznets reveal that the average propensity to consume does not fall in the long run. This implies that the saving will not increase and hence it remains constant. Thus, option (b) is correct.

Option (a):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases. However, the studies conducted by Kuznets show that the saving rate is stable and it does not decrease in the long run. Thus, option (a) is incorrect.

Option (c):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable and it does not increase in the long run. Thus, option (c) is incorrect.

Option (d):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable. Thus, option (d) is incorrect.

Economics Concept Introduction

Savings: Savings is defined as that part of income that is not consumed in the current period and is to be used for future consumption.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 19, Problem 1QQ

To determine

The consumption function.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

According to the Keynesian consumption function, the saving rate in the economy increases as the income of the people increases. However, the data collected by Simon Kuznets reveals that the saving rate is stable. According to Keynes, the marginal propensity to consume is less than one and the average propensity to consume decreases as the income increases. This implies that as the income of people increases, the proportionate level of saving increases compared to the consumption. However, the studies conducted by Kuznets reveal that the average propensity to consume does not fall in the long run. This implies that the saving will not increase and hence it remains constant. Thus, option (b) is correct.

Option (a):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases. However, the studies conducted by Kuznets show that the saving rate is stable and it does not decrease in the long run. Thus, option (a) is incorrect.

Option (c):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable and it does not increase in the long run. Thus, option (c) is incorrect.

Option (d):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable. Thus, option (d) is incorrect.

Economics Concept Introduction

Savings: Savings is defined as that part of income that is not consumed in the current period and is to be used for future consumption.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 19, Problem 1QQ

To determine

The consumption function.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

According to the Keynesian consumption function, the saving rate in the economy increases as the income of the people increases. However, the data collected by Simon Kuznets reveals that the saving rate is stable. According to Keynes, the marginal propensity to consume is less than one and the average propensity to consume decreases as the income increases. This implies that as the income of people increases, the proportionate level of saving increases compared to the consumption. However, the studies conducted by Kuznets reveal that the average propensity to consume does not fall in the long run. This implies that the saving will not increase and hence it remains constant. Thus, option (b) is correct.

Option (a):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases. However, the studies conducted by Kuznets show that the saving rate is stable and it does not decrease in the long run. Thus, option (a) is incorrect.

Option (c):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable and it does not increase in the long run. Thus, option (c) is incorrect.

Option (d):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable. Thus, option (d) is incorrect.

Economics Concept Introduction

Savings: Savings is defined as that part of income that is not consumed in the current period and is to be used for future consumption.

Answer 6

Chapter 19, Problem 1QQ

To determine

The consumption function.

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

According to the Keynesian consumption function, the saving rate in the economy increases as the income of the people increases. However, the data collected by Simon Kuznets reveals that the saving rate is stable. According to Keynes, the marginal propensity to consume is less than one and the average propensity to consume decreases as the income increases. This implies that as the income of people increases, the proportionate level of saving increases compared to the consumption. However, the studies conducted by Kuznets reveal that the average propensity to consume does not fall in the long run. This implies that the saving will not increase and hence it remains constant. Thus, option (b) is correct.

Option (a):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases. However, the studies conducted by Kuznets show that the saving rate is stable and it does not decrease in the long run. Thus, option (a) is incorrect.

Option (c):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable and it does not increase in the long run. Thus, option (c) is incorrect.

Option (d):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable. Thus, option (d) is incorrect.

Economics Concept Introduction

Savings: Savings is defined as that part of income that is not consumed in the current period and is to be used for future consumption.

Answer 7

Chapter 19, Problem 1QQ

To determine

The consumption function.

Answer 8

Expert Solution & Answer

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Option (b):

According to the Keynesian consumption function, the saving rate in the economy increases as the income of the people increases. However, the data collected by Simon Kuznets reveals that the saving rate is stable. According to Keynes, the marginal propensity to consume is less than one and the average propensity to consume decreases as the income increases. This implies that as the income of people increases, the proportionate level of saving increases compared to the consumption. However, the studies conducted by Kuznets reveal that the average propensity to consume does not fall in the long run. This implies that the saving will not increase and hence it remains constant. Thus, option (b) is correct.

Option (a):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases. However, the studies conducted by Kuznets show that the saving rate is stable and it does not decrease in the long run. Thus, option (a) is incorrect.

Option (c):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable and it does not increase in the long run. Thus, option (c) is incorrect.

Option (d):

According to the Keynesian function, as the income of the people increases, the saving rate of the economy increases and it will not decrease. However, the studies conducted by Kuznets show that the saving rate is stable. Thus, option (d) is incorrect.