You are given the following data concerning Kadwan, a country located in the mountains. • Consumption function: C = 125 +0.50Y • Investment function: I = 125 • Aggregate expenditure function: AE =C+I • Equilibrium: AE = Y Describe the graph of the consumption function and the aggregate expenditure function and then identify the equilibrium level of income. The AE line is found by adding I to C. AE is The consumption function has an intercept of and a slope equal to MPC = achieved at Y = C with a slope equal to the MPC and an intercept of steeper than parallel to flatter than Equilibrium

You are given the following data concerning Kadwan, a country located in the mountains. • Consumption function: C = 125 +0.50Y • Investment function: I = 125 • Aggregate expenditure function: AE =C+I • Equilibrium: AE = Y Describe the graph of the consumption function and the aggregate expenditure function and then identify the equilibrium level of income. The AE line is found by adding I to C. AE is The consumption function has an intercept of and a slope equal to MPC = achieved at Y = C with a slope equal to the MPC and an intercept of steeper than parallel to flatter than Equilibrium

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 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
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?
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? Is it direct or indirect and then explain what it means.
The consumption function for a closed economy with no government sector is given by the equation: C = £200 million + 0.8 Y where C is aggregate consumption and Y is national income. (i) Calculate the value of aggregate savings if the level of national income is £4000 million. (ii) Calculate the equilibrium level of national income if the level of planned investment is £600 million. (ii) Calculate the level of aggregate consumption at the equilibrium level of national income if the level of planned investment is £1000 million. Calculate the change in national income if planned investment rose from £600 (iv) million to £800 million.
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A certain economy's consumption function is given by the equation C(x) = 0.85x + 4 where C(x) is the personal consumption expenditure in billions of dollars, and x is the disposable personal income in billions of dollars. Find C(0), C(50), and C(100). C(0) = billion dollars C(50) = billion dollars C(100) = billion dollars
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Suppose the consumption of an economy is given by C = 20 +0.6Y The following investment function is given : 1 = 10+ 02Y What will be the equilibrium level of national income?