Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Question
Chapter 10, Problem 1QQ
To determine
Consumption and investment in recession.
Expert Solution & Answer
Answer to Problem 1QQ
Option (c) is the correct answer.
Explanation of Solution
Option (c):
In a typical recession, consumption falls, and the investment also decreases at more than the proportionate rate. Recession is a period in which most of the
Option (a):
In a typical recession, consumption will not rise. The consumption and investment decrease during recession, and the investment falls at more than the proportionate rate. Thus, option (a) is incorrect.
Option (b):
In a typical recession, consumption will not rise. The consumption and investment decrease during recession, and the investment falls not less than but more than the proportionate rate. Thus, option (b) is incorrect.
Option (d):
In a typical recession, consumption will fall. However, the fall in investment is not less than the proportionate rate. Thus, option (d) is incorrect.
Economics Concept Introduction
Recession: A recession is a significant decline in activity across the economy, lasting longer than a few months.
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Students have asked these similar questions
Which of the following will most likely cause movement along the consumption function?
a.
A change in tastes
b.
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c.
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d.
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The fact that marginal propensity to consume (MPC) is larger than 0 means that
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s. Consumption will decrease following as increase in current income
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