Which consumption is dependent on income? A) Marginal Consumption B) Nominal Consumption C) Real Consumption D) Autonomous Consumption E) Stimulated Consumption

AE, 200 50 45° 200 Aggregate output ($ millions) Figure 8.11 Refer to Figure 8.11. A $20 million decrease in autonomous consumption Select one: a. changes equilibrium expenditure to $120 million. b. will change the MPC. c. changes equilibrium output to $180 million. d. will change the MPS. Aggregate expenditures ($ millions)

1. Supply and demand in the neoclassical economy Consider an economy in which the consumption, investment and production functions are as follows. C = 90 + 0.7(Y − T) I = 250 − 20r F(K, L) = AK0.5L0.5 The capital and labor supply are equal to 100 each, A=10, G = 200 and T = 200. Compute the equilibrium values of output, overall labor income, consumption, public savings, national savings, investment, and the interest rate. Suppose now government spending increases to G=300 (everything else stays the same). What happens to output, consumption, savings, investment and the interest rate? Compute the new values for these variables.

Course: Microeconomics - Intertemporal Consumption Decisions Consider a person who consumes in the 2 periods (C1 and C2), but ONLY works and earns an income in the first period (C1). Assume that consumption in each period behaves as a normal good.a) What is the effect of a rise in income on welfare? And on consumption in both periods? GRAPHb) What is the effect of a rise in the interest rate (assume that r goes from 10% to 15%) that occurs before the consumption decisions on welfare? GRAPH and on consumption in both periods?) GRAPH