Question 34Identify the correct statement with respect to consumption and saving function.Both the consumption function and the saving function have negative slopes.As disposable income declines, consumption and saving increase.O The consumption function has a negative slope while the saving function has a positive slope.As disposable income rises, consumption and saving increases.The consumption function has a positive slope while the saving function has a negative slope.

Both consumption and saving have a direct relationship with disposable income which means the level…

Question 34 Identify the correct statement with respect to consumption and saving function. Both the consumption function and the saving function have negative slopes. As disposable income declines, consumption and saving increase. The consumption function has a negative slope while the saving function has a positive slope. As disposable income rises, consumption and saving increases. The consumption function has a positive slope while the saving function has a negative slope.

Question 34 Identify the correct statement with respect to consumption and saving function. Both the consumption function and the saving function have negative slopes. As disposable income declines, consumption and saving increase. The consumption function has a negative slope while the saving function has a positive slope. As disposable income rises, consumption and saving increases. The consumption function has a positive slope while the saving function has a negative slope.

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter9: Aggregate Demand

Section: Chapter Questions

Problem 1.1P

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Question 8 Which of the following is correct as an interpretation of the Keynesian consumption function? None of the others is correct O The Keynesian consumption function implies that your consumption depends on your overall wealth, rather than your current income. O The Keynesian consumption function states that as income increases consumption increases more than proportionately. The Keynesian consumption function is consistent with the observation that consumption can increase even if disposable income remains the same. The Keynesian consumption function predicts that if your current income is less than your expected future income, you should borrow today to finance your current consumption needs.
An increase in disposable income shifts Select one: a. both the consumption and savings functions downward. b. the consumption function upward and leads to a movement along the savings function. O c. neither the consumption function or the savings function because it leads to a movement along both the consumption and savings function. d. both the consumption and savings functions upward.
3. Consumption function and non-income determinants The following graphs show an economy's initial position at point A along its consumption function (C). Suppose disposable income increases. On the graph, shift either the consumption curve or the initial point on the consumption function to show the impact of an increase in disposable income. (Note: In the scenario where the curve shifts, only shift the curve and do not adjust the position of the point.) ? REAL CONSUMPTION (Billions of dollars) C REAL DISPOSABLE INCOME (Billions of dollars) Now suppose that rising home values increase households' net wealth. C O A On the following graph, shift either the consumption curve or the initial point on the consumption function to show the impact of an increase in households' net wealth. (Note: In the scenario where the curve shifts, only shift the curve and do not adjust the position of the point.)
1. The positive relationship between consumption expenditure and disposable income can be shown by a positive slope of consumption curve. Answer: Reason: O Accessibility: Investigate hp
2. List four factors that could shift the consumption schedule except disposable income. Shifts in the consumption schedule could be caused by any of the non-income determinants of consumption and saving. This includes changes in any of the following: а) b) c) d) When wealth increases, it shifts the consumption schedule (upward , downward ) as people consume more at each level of disposable income. There is an opposite effect on saving. The saving schedule shifts (upward , downward ) at each level of disposable income because people save less. ) effect occurs when there is a significant drop in consumer wealth that A(r will shift the consumption schedule downward. During the Great Recession of 2007–2009 there was a "reverse wealth effect" because as wealth declined during the recession, people consumed less and saved ( more, less ). Such a situation creates a paradox of thrift in which more saving helps individual household budgets, but as people cut back on their consumption and…
Use the consumption function shown to answer the following questions. 110- At what level of income is consumption equal to disposable income? $ billion. 100 C = Y. Which of the following statements is true? O A. Consumption is $30 billion when the income level is $100 billion. O B. Saving equals consumption at an income level of $40 billion OC. At an income level of $0 billion there is dissaving equal to $20 billion. D. At an income of $100 billion there is dissaving of $30 billion. 90 80- 70 60- 50- 40 30- 20 10- 10 20 30 40 s0 60 70 Bo 90 100 110 Real Disposable Income ($ billions) Planned Real Consumption
Which of the following is correct as an interpretation of the Keynesian consumption function? None of the others is correct O The Keynesian consumption function implies that your consumption depends on your overall wealth, rather than your current income. The Keynesian consumption function states that as income increases consumption increases more than proportionately. O The Keynesian consumption function is consistent with the observation that consumption can increase even if disposable income remains the same. O The Keynesian consumption function predicts that if your current income is less than your expected future income, you should borrow today to finance your current consumption needs.
On a graph of a consumption function, what is the significance of the 45-degree line? O a. It connects all points where desired consumption equals actual disposable income. O b. It connects all points where desired consumption equals desired expenditure. O c. Desired consumption is zero at all points along the 45-degree line. O d. It connects all points where desired consumption equals desired saving. O e. It shows the slope of the average consumption function, against which we measure other consumpfion functions
If Michelle's income is reduced to zero after she loses her job, her consumption will be and her saving will be O greater than zero; greater than zero O less than zero; greater than zero O greater than zero; less than zero O less than zero; less than zero
100 gaia 270 200 130 60 450 100 200 300 Aggregate income (Y) Figure 8.3 ?Refer to Figure 8.3. Which of the following statements is true „Aggregate saving is negative for all income levels below $400 a O For all aggregate income levels above $200, aggregate consumption is greater than aggregate income b O If consumption is the only expenditure, this economy would be in equilibrium at an aggregate income level of c O $300 Saving is negative at all income levels below $200 d O Aggregate consumption (C)
3. Consumption function and non-income determinants The following graphs show an economy's initial position at point A along its consumption function ( CF). Suppose disposable income suddenly and unexpectedly decreases. Adjust the following graph by either shifting the consumption function curve or the initial point on the consumption curve (A) to illustrate the impact of a fall in disposable income. CONSUMPTION SPENDING (Billions of dollars) Consumption Function REAL DISPOSABLE INCOME (Billions of dollars) REAL CONSUMER SPENDING (Billions of dollars) Consumption Function Now suppose that there is a stock market crash that wipes out a third of households' net wealth. Consumption Function A Adjust the following graph by either shifting the consumption function curve or the initial point on the consumption function curve (A) to illustrate the impact of a decline in households' net wealth. (?) REAL DISPOSABLE INCOME (Billions of dollars) Consumption Function. (?) 0 A
9. Given this diagram of Consumption and Savings functions, What will be the level of savings at an income level of 80? 10. Given this diagram of Consumption and Savings functions, What is the level of total desired consumption at income level of 60? 11. Given this diagram of Consumption and Savings functions, What is the level of "induced consumption" at income level of 80?