Homework Answers
(a) Intercept in the estimated equation is the value of consumption when income is zero. In the equation, this value is equal to (-124.84), which means that consumption is negative when income is zero. A negative consumption signifies savings.
(b) When Income is $30,000,
Estimated consumption ($) = - 124.84 + (0.853 x 30,000) = - 124.84 + 25,590 = 25,465.16
(c) MPC equals the coefficient of Income in the regression equation. Therefore,
MPC = 0.853
APC = Consumption / Income, therefore APC rises with increase in income. MPC and APC are graphed below.
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Consider two closed economies that are identical except for their marginal propensity to consume (MPC). Each economy is currently in equilibrium with real income and planned expenditure equal to $100...
Consider two closed economies that are identical except for
their marginal propensity to consume (MPC). Each economy is
currently in equilibrium with real income and planned expenditure
equal to $100 billion, as shown by the black points on the
following two graphs. Neither economy has taxes that change with
income. The grey lines show the 45-degree line on each graph.The first economy's MPC is 0.5. Therefore, its initial planned
expenditure line has a slope of 0.5 and passes through the...
Can I get the solution for question 18? This is all . There is no more...
Can
I get the solution for question 18?
This is all . There is no more information.
16 y | 100 15. * 1-20 y | 100 95 91 -17 -15 120 118 83 -14 130 70 -10 140 Applications 17. Consumption and Disposable Income An economist wishes to estimate a line that relates personal consumption expenditures C and disposable income I. Both C and I are in thousands of dollars. She interviews eight heads of households for families of...
3. (25 points: 12.5 each part) In the linear consumption function cons = B. + B, inc the (estimated) marginal propensity to consume (MPC) out of income is simply the slope, B1, while the average propensity to consume (APC) is cons/inco Bolinc + B.. Using observations for 100 families on annual income and consumption (both measured in dollars), the following equation is obtained: cons = -124.84 +0.853inc, where n = 100 and Rº 0.692. a) What is the predicted consumption...
Suppose the marginal propensity to consume if 0.75 and autonomous consumption (consumption at zero income) is $4,000. If income is $50,000, consumption spending is a. $37,500 b. $41,500 C. $45,500 d. $54,000 QUESTION 4 If the consumption function for an economy is C = 180 + 75 Yd (disposable income) and spending increases by $800, then the resulting change in national income is a. +$2,800 OOO b. 5-3,200 c. $-2,800 d. $+3,200 QUESTION 5 Assume the actual GDP is $4800...
5. Graphing the consumption function from the MPC 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 50¢. 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 (circle symbol) to plot this economy's consumption function based on these data. Consumption Function CONSUMPTION (Billions of dollars) 0 800...
Consider two closed economies that are identical except for
their marginal propensity to consume (MPC). Each economy is
currently in equilibrium with real income and planned expenditure
equal to $100 billion, as shown by the black points on the
following two graphs. Neither economy has taxes that change with
income. The grey lines show the 45-degree line on each graph.The first economy's MPC is 0.5. Therefore, its initial planned
expenditure line has a slope of 0.5 and passes through the...
Can
I get the solution for question 18?
This is all . There is no more information.
16 y | 100 15. * 1-20 y | 100 95 91 -17 -15 120 118 83 -14 130 70 -10 140 Applications 17. Consumption and Disposable Income An economist wishes to estimate a line that relates personal consumption expenditures C and disposable income I. Both C and I are in thousands of dollars. She interviews eight heads of households for families of...
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