Consider the non-linear aggregate consumption function: C = 0.05Y²+ Y + 80 (Where, C= aggregate consumption and Y= aggregate income). a) Find the marginal propensity to consume (MPC) and the average propensity to consume (APC). b) What is the relationship between MPC and APC in this case? c)What happens to the MPC as Y becomes larger and larger? Is it likely that an aggregate consumption function would have this functional form?

Consider the non-linear aggregate consumption function: C = 0.05Y²+ Y + 80 (Where, C= aggregate consumption and Y= aggregate income). a) Find the marginal propensity to consume (MPC) and the average propensity to consume (APC). b) What is the relationship between MPC and APC in this case? c)What happens to the MPC as Y becomes larger and larger? Is it likely that an aggregate consumption function would have this functional form?

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter18: The Keynesian Model

Section: Chapter Questions

Problem 6SQ

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Consider the non-linear aggregate consumption function: C = 0.05Y²+ Y + 80 (Where, C = aggregate consumption and Y = aggregate income). b) What is the relationship between MPC and APC in this case? c)What happens to the MPC as Y becomes larger and larger? Is it likely that an aggregate consumption function would have this functional form? e) Illustrate your solutions to (b) and (c) graphically, showing the consumption function, the MPC and APC.
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Construct a consumption function from the data given here and determine the MPC. Given the consumption function in the above question, what is the relationship between disposable income and consumption?
The autonomous consumption expenditures and autonomous investment expenditures in an economy are $600 and $350, respectively. It is also observed that individuals spend 70% of their additional income on consumption. Write down the consumption function for this economy using the information provided above. (Round your response for the intercept term to the nearest whole number and for the slope term to one decimal place.) C . +..Y Write down the aggregate expenditure function for this economy using the information provided above. (Round your response for the intercept term to the nearest whole number and for the slope term to one decimal place.) AE =..+..Y •.. The equilibrium income that would set the actual national income to the desired aggregate expenditure is $. (Round your response to the nearest dollar.) If the actual national income were $1,584 in this economy, then the inventories of the firms would be failing or rising and firms would reduce or increase their output.
Consider the hypothetical country of Kejimkujik. Suppose that national income in Kejimkujik is $300 billion, households pay $100 billion in taxes, household consumption is equal to $160 billion, and the marginal propensity to consume (MPC) is 0.6. On the following graph, use the blue line (circle symbol) to plot the economy's consumption function. Consumption Function050100150200250300350400450500500450400350300250200150100500CONSUMPTION (Billions of dollars)DISPOSABLE INCOME (Billions of dollars) Suppose now that Kejimkujik’s national income increases to $330 billion. Assuming the amount paid in taxes is fixed at $100 billion and that MPC = 0.6, what is the new amount of household consumption? $148 billion $219.4 billion $220.6 billion $178 billion
© 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
Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.50. That is, if disposable income increases by $1, consumption increases by 50c. Suppose further that last year disposable income in the economy was $400 billion and consumption was $350 billion. On the following graph, use the blue line (arcle symbol) to pict this economy's consumption function based on these data. CONSUMPTION (Bions of dollars) ) 700 600 500 400 300 200 100 0 -100 9 100 200 300 400 500 000 DISPOSABLE INCOME (Billions of dollars) 700 000 From the preceding data, you know that the level of savings in the economy last year was 3 economy is billion and the marginal propensity to save in this Suppose that this year, disposable income is projected to be $600 billion. Based on your analysis, you would expect consumption to be 3 billion and savings to be S billion,
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b) With an example, elaborate the consumption function
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