Consumption Function

All response for the 5 questions should be at least 75 words in length. You are required to use at least your textbook as source material for your response. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations.

Question 1
Explain what would cause the government purchases function to increase. Will a change in social
security spending affect government purchases?
Your response should be at least 75 words in length. You are required to use at least your
textbook as source material for your response. All sources used, including the textbook, must be
referenced; paraphrased and quoted material must have accompanying citations.
Question 2
What is a consumption function? Describe the graph of a consumption function and explain its
shape. If total spending is consumption plus investment spending, how does an increase in the
interest rate affect total spending?
Your response should be at least 75 words in length. You are required to use at least your
textbook as source material for your response. All sources used, including the textbook, must be
referenced; paraphrased and quoted material must have accompanying citations.
Question 3
For each of the following, explain whether it shifts the short-run aggregate supply curve, the
long-run aggregate supply curve, or the aggregate demand curve (or more than one of these).
a. Households decide to save a smaller share of their disposable income.
b. There is an 8-week strike in the steel industry.
c. A drought in the Midwest causes poor wheat harvest.
d. The labor force participation rate increases.
Your response should be at least 75 words in length. You are required to use at least your
textbook as source material for your response. All sources used, including the textbook, must be
referenced; paraphrased and quoted material must have accompanying citations
Question 4
How is an aggregate demand curve derived? What would cause the aggregate demand curve to
shift to the right?
Your response should be at least 75 words in length. You are required to use at least your
textbook as source material for your response. All sources used, including the textbook, must be
referenced; paraphrased and quoted material must have accompanying citations.
Question 5
Suppose MPC is 0.8 initially. Households then change their behavior so that the MPC falls to
0.75. What happens to aggregate expenditures? Why?
Your response should be at least 75 words in length. You are required to use at least your
textbook as source material for your response. All sources used, including the textbook, must
be referenced; paraphrased and quoted material must have accompanying citations.