| Macroeconomics |
| Consumption Functions |
| Savings Functions |
| | | | | Choose 6 questions to complete. |
| | 1 | In a simple economy assume that there are no taxes and Yd is disposable income. |
| | | Let the consumption function equal: |
| | | C = 100 +0.75Yd | | | | | Yd (hor) | Y=Yd | C=100+0.75*Yd | I=400 | Y=C+I | S=Yd-C |
| | | I = 400 |
| | | Determine the equilibrium GDP. |
| | | Graph the consumption equation. |
| | | Graph the consumption equation plus the investment line. |
| | | Label your lines and add the axis titles to your graph. |
| | 2 | An economy's consumption function is given below in the table: |
| | | Yd (disposable income) | Investment, I | Consumption, C |
| | | 0 | 100 | 100 |
| | | 125 | 100 | 200 |
| | | 250 | 100 | 300 |
| | | 275 | 100 | 400 |
| | | 500 | 100 | 500 |
| | | 625 | 100 | 600 |
| | | Write the equation for the consumption function. |
| | | When disposable income is equal to $250, total expenditures Y=C+I equals how much? |
| | | In this model above, when investment is included, when the disposable income Yd is equal to $250, how much is savings? |
| | 3 | What is the MPS and the MPC. |
| | | Write a consumption equation example and highlight the MPC. |
| | | Interpret the MPC in your example equation. |
| | | Write the corresponding saving function and highlight MPS. |
| | | Graph your equations for consumption, C and saving, S. |
| | 4 |
| | | In a simple economy assume that there are no taxes and Yd is disposable income. |
| | | Let the consumption function equal: |
| | | C = 100 +0.65Yd | | | | | Yd (hor) | Y=Yd | C=100+0.65*Yd | I=500 | Y=C+I | S=Yd-C |
| | | I = 500 | | | | | 0 | 0 |
| | | | | | | | 100 | 100 |
| | | Complete the table to the right. | | | | | 200 | 200 |
| | | Determine the equilibrium GDP. | | | | | 500 | 500 |
| | | Graph the consumption equation. |
| | | Graph the consumption equation plus the investment line. |
| | | Graph the saving function. |
| | | Label your lines and add the axis titles to your graph. |
| | 6 | Choose the best answer: |
| | | Personal disposable income, or income after taxes, can be either: |
| | | A. Consumed or invested. |
| | | B. Consumed or saved. |
| | | C. Saved or dissaved. |
| | | D. Saved or invested. |
| | 7 | In a 2 sector model, when Consumption C = $40+0.90Yd and Investment I = $50, find equilibrium output. |
| | | Graph the C + I =Yd line. |