Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 9, Problem 15E
To determine
(a)
To write:
Consumption function
C= 200+0.8Y
The amount of autonomous consumption.
To determine
(b)
To write:
Consumption function
C= 200+0.8Y
The value of marginal propensity to consume.
To determine
(c)
To write:
Consumption function
C= 200+0.8Y
The value of consumption when GDP equals $1000.
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Consider an economy that is described by the following:
Autonomous consumption = 100
Autonomous investment = 100
Marginal propensity to consume = 0.75
a. What is the consumption function of this economy?
b. Derive the equilibrium income of this economy?
c. How large is the change in the equilibrium income if investment rises to 200?
© Macmillan Learning
The graph represents consumption (C) as a function of
disposable income (DI). Assume the consumption function is
linear. What is the value of the marginal propensity to
consume (MPC)?
Round the value of the MPC to two decimal places.
Consumption
$1050
900
MPC =
750
600
450
300
150
C=DI
C
0
$150 300 450
600
750 900 1050
Disposable income
1. What is meant by "autonomous consumption"?
2. Explain the consumption puzzle?
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