Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 23, Problem 5.2P
To determine
Effect of increase in savings of the households.
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Very 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?
Graphically illustrate the aggregate consumption and saving functions. Explain
Show on a graph of the market for saving and investment the
effect of the following. (The graph is a basic savings and
investment graph).
In an effort to improve fiscal conditions, policymakers raise taxes. This
results in lower disposable income.
Real interest rate (percent per year)
10.
8
6
4
2
SLF
0
1.2
1.4
1.6
DLF
2.0
2.2
1.8
Loanable funds (trillions of 2009 dollars)
The savings function [Select]
The investment function [Select]
The real interest rate [Select]
The level of savings and investment
[Select]
Chapter 23 Solutions
Principles of Economics (12th Edition)
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Similar questions
- Graphically illustrate the aggregate consumption and saving functions. Explain these functions with at least 200 words. You may give examples.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_forwardCalculate the following Consumption = ? Suppose GDP is $8 trillion, taxes are $1.5 trillion, private saving is $0.5 trillion, and public saving is $0.2 trillion.arrow_forward
- The 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).arrow_forwardA) What will be the new level of consumption at the $ 340 billion level of disposable income? B) What will be the new level of saving?arrow_forwardExplain how each of the following will affect the consumption and saving schedules (as they relate to GDP) or the investment schedule, other things equal: A large increase in the value of real estate, including private houses A decline in real estate rate A sharp, sustained decline in stock prices. An increase in the rate of population growth. The development of a cheaper method of manufacturing computer chips. A sizable increase in the retirement age for collecting Social Security benefits. An increase in the Federal personal income tax.arrow_forward
- Explain what happens to consumption, investment, and the interest rate when the government increases taxes. Show graphically the effect of increased taxes when saving is not dependent on interest rate.arrow_forwardIf 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 .arrow_forwardSuppose that disposable income, consumption, and saving in some country are $800 billion, $700 billion, and $100 billion, respectively. Next, assume that disposable income increases by $80 billion, consumption rises by $56 billion, and saving goes up by $24 billion. Instructions: In part a, round your answers to 2 decimal places. In part b, round your answers to 3 decimal places. a. What is the economy's MPC? MPC = What is its MPS? MPS = b. What was the APC before the increase in disposable income? АРС before%3D What was the APC after the increase? APC after =arrow_forward
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