A downward shift in the consumption function can be caused a) a decrease in wealth. b) expectations of higher permanent income. ↓y c) a decrease in disposable income.
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- An economy's consumption function is depicted in the table below. Disposable Income (Y) Planned Investment Consumption (C) ($ billions) ($ billions) ($ billions) 0 50 120 50 240 50 360 50 480 50 600 50 a. When disposable income is equal to $240 billion total expenditures (including investment) equal OA. $342 billion. OB. $50 billion. b. Therefore, in this model when investment is included, when the disposable income is $240 billion, saving must be equal to OB. $-102 billion. O C. -0.22. OA. $-52 billion. 100 196 292 388 484 580 OC. $240 billion. OD. $292 billion. OD. $50 billion.Because consumption is largely determined by_________ income, consumption is _________equally distributed than current income.a. permanent; moreb. permanent; lessc. transitory; mored. transitory; lessUtility Optimization Problem Suppose a household has the following lifetime utility function: (a) Finding Partial Derivatives of Utility U = c1/2 + Bc1/2 Find expressions for the partial derivatives of lifetime utility, U, with respect to period t and period t + 1 consumption. Is marginal utility of consumption in both periods always positive? (b) Finding Second Derivatives of Utility a²U Find expressions for the second derivatives of lifetime utility with respect to period t and t + 1 consumption, i.e., 321 and 227. Are these second derivatives always negative for any positive values of period t and t+1 consumption? c) Deriving Indifference Curve Expression Derive an expression for the indifference curve associated with lifetime utility level Uo (i.e., derive an expression for C++1 as a function of U₁ and c). What is the slope of the indifference curve? How does the magnitude of the slope vary with the value of Ę? d) Combining Budget Constraints Suppose that the household faces two…
- 19. If the actual level of income is 18, what would be the resulting unplanned inventory investment? a) -8 b) -6 c) -4 d) Zero e) -2Which of the following is not a valid expenditure function? OU P.P, O UP, O None of these can be expenditure functions O (P. + P,) VŨ P+P(a)Elaborate THREE (3) determinants in which consumption can be increased according to the consumption function. (b)Assume that a three-sector economy in Country W. The amount of autonomous consumption is RM300 million with the proportion of an increase in income that is spent on consumption is 0.5. An induced tax of 20% is imposed by the country. The amount of investment is RM250 million, and the amount of government spending is RM150 million. (i)Calculate the national income equilibrium. (ii)Based on your answer in (i), show the aggregate expenditure graph. (iii)Explain what would happen to the national income equilibrium if the investment changes by RM100 million.
- Dissaving occurs where: O saving exceeds consumption. saving exceeds income. income exceeds consumption. consumption exceeds income.ingr Income (GDP = DI) $480 520 560 600 640 680 720 760 800 Consumption 512 536 560 504 608 632 b. If the MPC is 0.75? 656 680 704 Saving $-32 -16 0 16 32 48 64 80 96 What is the value of the marginal propensity to consume? APC Instructions: Round your answer to the nearest whole number. Change in GDP = billion. 1.067 0.990 0.880 APS -0.067 0.027 a. By how much will GDP change if firms increase their investment by $9 billion and the MPC is 0.9? Instructions: Round your answer to the nearest whole number. Change in GDP- 9 billion. 0.120Only typed answer Holly's break-even level of income where her consumption equals disposable income is $980 and her MPS is 0.17. If her actual disposable income is $1,337, her level of consumption spending must be $
- 2. If MPC is given as 0.8, a rise in disposable income from $250m to $300m will 1. decrease consumption by $50m. 2. increase consumption by $300m. 3. increase consumption by $50m. 4. increase consumption by $40m.(a) Explain the difference between induced consumption expenditure and autonomous consumption expenditure. Why is not all consumption expenditure induced expenditure? (b) How is it possible for households to have a negative savings rate and what has caused this negative household savings rate? Is this negative household savings rate sustainable in the long run?Given the consumption function C=$500bil + 0.8Y, an increase in disposable income from $6,000 billion to $7,000 billion will cause consumption to: A.increase by $1,000 bil. B.decrease by $800 bil. C.increase by $800 bil. D.decrease by $1,000.