Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 30, Problem 1MCQ
To determine
The option that correctly states about the consumption function.
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Consider the following economy. What is the mpc in this economy?
Planned
Government
Net Exports
Aggregate
Change in
Real GDP (Y) Consumption (C)
Investment (I') Purchases (G)
(NX)
Expenditures (AE)
Inventories
10000
8200
800
11000
9000
600
12000
9800
13000
14000
15000
800
Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.
a
0.50
b
0.75
C
0.80
d
0.90
Q3.
Real GDP
Consumption
Planned Investment
Government Purchases
Net Exports
$5,000
$4,500
$500
$325
-125
6,000
5,300
$500
$325
-125
7,000
6,100
$500
$325
-125
8,000
6,900
$500
$325
-125
Answer the questions based on the table below. The values are in millions of dollars.
What is the equilibrium level of real GDP?
What is the MPC?
If potential GDP is $7,000 million, is the economy at full employment? If not, what is the condition of the economy?
If the economy is not at full employment, by how much should government spending increase so that the economy can move to the full employment level of GDP?
13
hts
02:59:16
eBook
Print
References
a. Fill in the missing numbers (gray-shaded cells) in the table.
Instructions: In the table, enter your answers for consumption as a whole number. Round your answers for APC and APS to 4 decimal
places. Round your answers for MPC and MPS to 1 decimal place. If you are entering any negative numbers be sure to include a
negative sign (-) in front of those numbers.
Level of Output and
Income (GDPDI)
$240
260
280
300
320
340
360
380
400
Consumption
Saving
$-4
0
4
8
12
16
20
24
28
APC
APS
MPC
MPS
Chapter 30 Solutions
Foundations of Economics (8th Edition)
Ch. 30 - Prob. 1SPPACh. 30 - Prob. 2SPPACh. 30 - Prob. 3SPPACh. 30 - Prob. 4SPPACh. 30 - Prob. 5SPPACh. 30 - Prob. 6SPPACh. 30 - Prob. 7SPPACh. 30 - Prob. 8SPPACh. 30 - Prob. 9SPPACh. 30 - Prob. 1IAPA
Ch. 30 - Prob. 2IAPACh. 30 - Prob. 3IAPACh. 30 - Prob. 4IAPACh. 30 - Prob. 5IAPACh. 30 - Prob. 6IAPACh. 30 - Prob. 7IAPACh. 30 - Prob. 8IAPACh. 30 - Prob. 9IAPACh. 30 - Prob. 10IAPACh. 30 - Prob. 1MCQCh. 30 - Prob. 2MCQCh. 30 - Prob. 3MCQCh. 30 - Prob. 4MCQCh. 30 - Prob. 5MCQCh. 30 - Prob. 6MCQCh. 30 - Prob. 7MCQCh. 30 - Prob. 8MCQ
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- Give typing answer with explanation and conclusion what is the US GDP for the first quarter and second quarter of 2021? What is the personal consumption expenditures for the first quarter and second quarter of 2021?arrow_forwardK Use the information in the table to answer the following questions All numbers are in bilions of 2012 dollars Planned Investment (1) $1,000 $1.000 $1,000 $1,000 $1,000 Real GDP (Y) $12.000 $13,000 Consumption (C) $10.100 $10,900 $14,000 $15,000 $15,000 The equilibrium level of GDP is $ billion The MPC is (enter your response to two decimal places) Suppose that net exports increase by $400 billion Using the multiplier formula determine the new level of GDP A $400 billion increase in net exports leads to a change in spending of $ billion, so the new level of GOP will be S billion $11,700 $12,500 $13,300 Government Purchases (G) $2.000 $2.000 $2.000 $2,000 $2.000 Net Exports (NX) -$500 -$500 -$500 -$500 -$500arrow_forwardClick on the icon to read the news clip, then complete the following steps. Business inventories fall when real GDP rises because 1800- 1600- Aggregate expenditure (billions of 2002 dollars) ○ A. inventories are falling from above target to their target levels 1400- B. firms put more production time into producing consumption goods and services OC. firms put more production time into producing exports 1200- OD. both B and C are correct 1000- The graph shows the aggregate planned expenditure curve. Draw a new AE curve to show the effect of an increase in exports and business investment. Label it AE₁. 8004 800 1000 1200 1400 45 degree line G AE 1600 1800 Draw a point at the new equilibrium expenditure. Draw an arrow along the new AE curve to show the effect of the increase in real GDP on consumption expenditure. Real GDP (billions of 2002 dollars) >>> Draw only the objects specified in the question. - News clip Business Inventories Decline, GDP Rises Real gross domestic product (GDP)…arrow_forward
- What are the four categories of aggregate expenditure (demand)? Give an example of each. 9.1 Calculate the Marginal Propensity to Consume and the Marginal Propensity to Save. Fill in the blanks in the following table. Show that the MPC plus the MPS equals 1. National Income & Real GDP (Y) Consumption (C) Saving (S) MPC MPS $9,000 $8,000 $10,000 $8,600 $11,000 $9,200 $12,000 $9,800 $13,000 $10,400arrow_forwardClassify each of the following items as a final good or service or an intermediate good or service, and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services. A. A textbook bought by a student B. A computer purchased for a senator's office C. New cars bought by Hertz, the car rental firm D. Aluminum sheets bought by Boeing 1. A is a final good that is consumption expenditure, B is a final good that is government expenditure, C is a final good that is investment, and D is an intermediate good. 2. A is a final good that is investment, B is an intermediate good, C is a final good that is investment, and D is an intermediate good. 3. A is a final good that is consumption expenditure, B is an intermediate good, C is a final good that is consumption expenditure, and D is a final good that is investment. 4. A is a final good that is consumption expenditure, B is a final good…arrow_forwardUse data below to answer the following questions:Consumption expenditures $300 billion, Government purchases $50 billionTaxes $40 billion, Investment $80 billion, Social Security payments $20 billionImports $30 billion, Exports $40 billiona) How much is GDP?b) How much are net exports?c) Social Security payments are government expenses. Should they be included in GDP? Explain.arrow_forward
- The table below provides Income and consumption Data in billions of dollars. Answer question below based on it.Disposable Consumption SavingsIncome100 80 --------200 150 --------- If the government increases spending by $5,000, then based on data in question 21, GDP in this economy will increase byarrow_forwardExplain some reasons why consumption spending and gross private domestic investment spending are so important. What determinants do they have in common?arrow_forwardClassify each of the following items as a final good or service or an intermediate good or service, and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services. A. A new limousine for the president B. A DVD bought by a household C. Steel sheets bought by General Motors D. A new apartment building O 1. Ais a final good that is government expenditure, B is a final good that is consumption expenditure, C is an intermediate good, and D is a final good that is investment. O 2. A is an intermediate good, B is a final good that is investment, C is an intermediate good, and D is a final good that is investment. O 3. Ais a final good that is government expenditure, B is a final good that is consumption expenditure, Cis a final good that is consumption expenditure, and D is a final good that is consumption expenditure. O 4. Ais an intermediate good, B is a final good that is consumption expenditure, C is an intermediate good, and D is…arrow_forward
- 1.12 Study the following diagram and answer the question that follows. Expenditures (billions of dollars per year) 3500 3000 2500 2000 1500 1000 500 Figure 9.1 45 500 1000 1500 2000 2500 3000 3500 Income (billions of dollars per year) At an income level of $2,000 billion, a) Consumption equals $1,500 billion. b) Saving equals $0. c) The MPC equals 0.80. d) There is dissaving.arrow_forwardCreate a graph for the aggregate expenditures (AE) model in Excel using the data from Table 1: A Private Closed Economy. Table 1 A Private Closed Economy Real domestic output (GDP=DI) (billions) Consumption (billions) Saving (billions) Investment (billions) Aggregate Expenditures (billions) $240 260 280 300 320 340 360 380 400 $244 260 276 292 308 324 340 356 372 $ -4 0 4 8 12 16 20 24 28 $16 16 16 16 16 16 16 16 16 $260 276 292 308 324 340 356 372 388arrow_forward11 pints eBook Print References Using the graph as a reference, suppose an economy's aggregate consumption function is C= $300 billion +0.50 YD. 1,000 Consumption ($ billions per year) 900 800 700 600 500 400 300 200 100 0 45° 20000 100 100 Disposable Income ($ billions per year) 50000 billion 700 billion 800 1,100 1,000 900 Instructions: Enter your responses as a whole number. a. At what level of income do households begin to save? $ b. By how much does consumption increase when disposable income rises $100 billion beyond the level of income from part a?arrow_forward
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