income, defined as the difference between income Y and taxes T. You observed that, after an increase in taxes T by $80, Miriam's consumption C decreased by $60. If Miriam's income (Y) did not change, you can deduce that her marginal propensity to consume (MPC) is disposable (a) 0.6 (b) 0.75 (c) 0.8 (d) -0.6
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A: Given; C= 400 + 0.5 Yd I = 700 - 4000i + 0.1Y G= 200 T= 200 (M/P)d = 0.75Y - 7500i (MP)= 600
Q: If a household experiences an $880 increase in consumption with a $1,100 increase in disposable…
A: Marginal propensity to consume shows the fraction of additional income that is spent on consumption.
Q: A university student recieved $1,000 upon graduation at age 20 years. This person was hired by one…
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A: Import refers to the situation that domestic country buying goods and services from the foreign…
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A: According to the given question In simple words we can say that the consumption function is an…
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A: Year Consumer Spending($) Disposable Income($) 2014 1,200 1,500 2015 1,440 1,800 2016 1,680…
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- Question: How can there be "Autonomous Spending" even when a person has zero income? O a) All of the above are correct. b) People need to consume at least a minimum to stay alive. UO People need a certain level of consumption even if they do not have income. O d) People spend money from their savings, borrowing or from unemployment or pension pay.Felice lives and works for two periods. In the first period, she earns 520 coconuts and in thesecond period, she earns 570 coconuts. In each period, she pays 20 coconuts in taxes.a. Suppose that Felice can save or borrow from a bank at the same interest rate of 10%.Suppose also that she likes to consume today 240 coconuts. Draw herbudget constraint including both intercepts, her endowment point including its coordinates,and use an indifference curve to show her optimal consumption point and its coordinates.b. Suppose that the government cuts taxes by 10 coconuts. What will the government haveto do to taxes in the future period to meet its lifetime budget constraint?c. What is the effect of the government’s action on Felice’s lifetime wealth, budgetconstraint and endowment point? Show and explain.d. What is the effect of the tax cut on her current consumption and welfare? Does theRicardian equivalence hold? Explain!e. Now suppose that the economy enters a recession, and some people…Imagine there is a consumption smoother (also known as a PIH consumer) who expectsto live for another 40 years and to work for another 30 years. They just learned thatthey will receive a permanent pay increase from their job of $800. How much extra dothey consume this year? What is their marginal propensity to consume?
- Figure 7.1 C b. 100 In Figure 7.1, all of the following is true except: An additional dollar of income always induces some additional consumption. O There is some level of consumption that is independent of income. O The marginal inclination to consume is greater than zero. O At zero income there is zero consumption.Felice lives and works for two periods. In the first period, she earns 520 coconuts and in the second period, she earns 570 coconuts. In each period, she pays 20 coconuts in taxes.a. Suppose that Felice can save or borrow from a bank at the same interest rate of 10%. Suppose also that she likes to consume today 240 coconuts. Draw herbudget constraint including both intercepts, her endowment point including its coordinates, and use an indifference curve to show her optimal consumption point and its coordinates.b. Suppose that the government cuts taxes by 10 coconuts. What will the government have to do to taxes in the future period to meet its lifetime budget constraint?c. What is the effect of the government’s action on Felice’s lifetime wealth, budget constraint and endowment point? Show and explain.d. What is the effect of the tax cut on her current consumption and welfare? Does the Ricardian equivalence hold? Explain!e. Now suppose that the economy enters a recession, and some…Felice lives and works for two periods. In the first period, she earns 520 coconuts and in the second period, she earns 570 coconuts. In each period, she pays 20 coconuts in taxes.a. Suppose that Felice can save or borrow from a bank at the same interest rate of 10%. Suppose also that she likes to consume today 240 coconuts. Draw herbudget constraint including both intercepts, her endowment point including its coordinates, and use an indifference curve to show her optimal consumption point and its coordinates.b. Suppose that the government cuts taxes by 10 coconuts. What will the government have to do to taxes in the future period to meet its lifetime budget constraint?c. What is the effect of the government’s action on Felice’s lifetime wealth, budget constraint and endowment point? Show and explain.d. What is the effect of the tax cut on her current consumption and welfare? Does the Ricardian equivalence hold? Explain!e. Now suppose that the economy enters a recession, and some…
- 1f the Consumption funchon, espressedas C=30+0,7Yd, chayes to C=20+028Yd. which of the fellowing will accaur? OThe Cansumption function Shifts.doon in. Parallel. 6 its slope Anckeases as the Consumpion functionmaes up O Hs Slape ockeases as the Sausing function. slides up its Slope 1wereases as the Consumption function. slides dacana O it sope deExeAses as the Saurisq function. sltdes down. the SautingWhen the consumption function lies above the 45-degree line, households * O Spend on consumption an increasing percentage of any increase in income O Spend on consumption a decreasing percentage of any increase in income O Are dissaving O Save all of any increase in income2. Given the consumption function: C= 100+ 0.80Y: a) How much is C if household come Y is zero?; b) How much is household savings S if household income Y is zero?
- Question 3 Euclid, whose income is W, consumes bundles of food (F) and transportation (T). Suppose that Euclid has constant MRSFT equal to 3. What is Euclid's demand for food if food is twice as expensive as transportation? O W(pr+2pr)- O W/Prtpr). O W/pr. O WI(2pr+Pr). O W/pr.Assume in a simple economy that the level of saving is –500 whenaggregate output equals zero and that the marginal propensity tosave is 0.2. Derive the saving function and the consumption func-tion, and draw a graph showing these functions. At what level ofaggregate output does the consumption curve cross the 45° line?Explain your answer and show this on the graph.If Carol's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to O save is 3/5. O consume is 1/2. O consume is 3/5. O consume is 2/5.
