Income –Consumption and Income-Saving Relationshipfinale (1)

Question 1

•Income refers to disposable income

Answer 1

(Yd)

Question 2

•Yd is an important

Answer 2

determinant of C and S

Question 3

amounts that households plan

Answer 3

to consume at

Question 4

Level of Income (Y)

Answer 4

Consumption (C)

Question 5

370

Answer 5

375

Question 6

390

Answer 6

390

Question 7

410

Answer 7

405

Question 8

430

Answer 8

420

Question 9

450

Answer 9

435

Question 10

470

Answer 10

450

Question 11

490

Answer 11

465

Question 12

510

Answer 12

480

Question 13

households plan

Answer 13

to save at various levels of

Question 14

Level of Income

Answer 14

Consumption (C)

Question 15

370

Answer 15

375

Question 16

390

Answer 16

390

Question 17

410

Answer 17

405

Question 18

430

Answer 18

420

Question 19

450

Answer 19

435

Question 20

470

Answer 20

450

Question 21

490

Answer 21

465

Question 22

510

Answer 22

480

Question 23

households plan

Answer 23

to consume their entire

Question 24

•The relationship between Yd, C and

Answer 24

S can

Question 25

Consumption (Pula)

Answer 25

425

Question 26

there is dissaving

Answer 26

at low levels of income

Question 27

•APC –the fraction

Answer 27

of total income that is

Question 28

Level of

Answer 28

Consumption

Question 29

Income (Y)

Answer 29

(C)

Question 30

370

Answer 30

375

Question 31

390

Answer 31

390

Question 32

410

Answer 32

405

Question 33

430

Answer 33

420

Question 34

450

Answer 34

435

Question 35

470

Answer 35

450

Question 36

490

Answer 36

465

Question 37

510

Answer 37

480

Question 38

1

Answer 38

APC falls as the level of income increases .

Question 39

2

Answer 39

APS increases as the level of income

Question 40

•The proportion or fraction of income saved

Answer 40

is

Question 41

allocated to consumption

Answer 41

or to saving,

Question 42

Level of

Answer 42

Consumpt

Question 43

Income

Answer 43

ion (C)

Question 44

370

Answer 44

375

Question 45

390

Answer 45

390

Question 46

410

Answer 46

405

Question 47

430

Answer 47

420

Question 48

450

Answer 48

435

Question 49

470

Answer 49

450

Question 50

490

Answer 50

465

Question 51

510

Answer 51

480

Question 52

• Where ;

Answer 52

where C is consumption spending, a =

Question 53

MPS

Answer 53

and Y is income

Question 54

• N.B. The saving

Answer 54

function shows

Question 55

relationship between

Answer 55

S and Y

Question 56

the consumption

Answer 56

function

Question 57

NON INCOME DETERMINANTS

Answer 57

OF

Question 58

consumption curve shifts

Answer 58

upward and the

Question 59

saving curve shifts

Answer 59

downward

Question 60

the saving function

Answer 60

shifts

Question 61

•Therefore an increase in taxes will shift

Answer 61

both

Question 62

•4.

Answer 62

Real interest rate

Question 63

•When making

Answer 63

an investment decision, firms

Question 64

consider the marginal

Answer 64

benefit(mb)

Question 65

marginal cost(mc)

Answer 65

of their investment.

Question 66

•STUDENTS TO DO (discuss

Answer 66

the factors that

Question 67

•The investment demand

Answer 67

curve is downward

Question 68

real interest rate and the quantity

Answer 68

of

Question 69

Real domestic

Answer 69

Consumption

Question 70

output (Y)

Answer 70

(C)

Question 71

370

Answer 71

375

Question 72

390

Answer 72

390

Question 73

410

Answer 73

405

Question 74

430

Answer 74

420

Question 75

450

Answer 75

435

Question 76

470

Answer 76

450

Question 77

490

Answer 77

465

Question 78

510

Answer 78

480

Question 79

530

Answer 79

495

Question 80

550

Answer 80

510

Question 81

•What is the equilibrium

Answer 81

output?

Question 82

•Mathematical illustration:

Answer 82

suppose that the

Question 83

•Assume further that planned investment

Answer 83

Ig is

Question 84

1

Answer 84

Calculate equilibrium

Question 85

2

Answer 85

Calculate the consumption

Question 86

3

Answer 86

What happens to equilibrium

Question 87

•n.b.

Answer 87

I = S only at the equilibrium

Question 88

•Equilibrium

Answer 88

income is given by

Question 89

•We get the same equilibrium

Answer 89

income as we

Question 90

•CHANGES

Answer 90

IN EQUILIBRIUM GDP AND THE

Question 91

changes output/income

Answer 91

by

Question 92

initial

Answer 92

change in investment spending

Question 93

•Therefore

Answer 93

we rewrite (1) above as

Question 94

•Y – bY = a +

Answer 94

I

Question 95

•Y(1 – b) = a +

Answer 95

I

Question 96

Y

Answer 96



Question 97

is the equilibrium

Answer 97

level of income

Question 98

•The equilibrium

Answer 98

level of income associated

Question 99

with investment level

Answer 99

I1 is

Question 100

Y

Answer 100



Question 101

Y

Answer 101



Question 102

I

Answer 102

I

Question 103

Y

Answer 103



Question 104



Answer 104

I

Question 105

•= 1/0.25

Answer 105

= 4

Question 106

the ultimate

Answer 106

change in Y

Question 107



Answer 107

Y

Question 108



Answer 108

I

Question 109

 

Answer 109

Y 

Question 110

•Therefore the multiplier

Answer 110

is

Question 111

•The value of the multiplier

Answer 111

depends on the

Question 112

larger the multiplier

Answer 112

and therefore the higher

Question 113

the equilibrium

Answer 113

GDP

Question 114

•Calculate the multiplier

Answer 114

when the MPC is 0.75,

Question 115

•Adding G

Answer 115

yields a new higher level of

Question 116

• Net Exports and Equilibrium

Answer 116

GDP

Question 117

Level of GDP

Answer 117

Net Exports

Question 118

370

Answer 118

5

Question 119

390

Answer 119

5

Question 120

410

Answer 120

5

Question 121

430

Answer 121

5

Question 122

470

Answer 122

5

Question 123

490

Answer 123

5

Question 124

510

Answer 124

5

Question 125

530

Answer 125

5

Question 126

550

Answer 126

5

Question 127

•Assume that : C= 50 + 0.8Y,

Answer 127

Ig = 30, Xn = 10

Question 128

•A. calculate the equilibrium

Answer 128

level of GDP

Question 129

•B. Calculate the consumption

Answer 129

level and the

Question 130

•C. What happens to equilibrium

Answer 130

GDP if

Question 131

•Assume a consumption

Answer 131

schedule for an open

Question 132

are independent

Answer 132

of national

Question 133

Calculate

Answer 133

Y and C

Question 134

and incomes) between

Answer 134

households,

Question 135

in the flow of expenditures

Answer 135

and incomes: Financial

Question 136

insurance companies

Answer 136

etc.).

Question 137

intermediation: intermediating

Answer 137

between

Question 138

financial

Answer 138

means at their disposal

Question 139

through provision

Answer 139

of guarantees for payments, issuing

Question 140

cheques, provision

Answer 140

of foreign exchange

Question 141

 The revised modelhighlights

Answer 141

these roles

Question 142

businesses for

Answer 142

Investment purposes

Question 143

considered to reduce the level

Answer 143

of economic activity,

Question 144

to increase the level of economic

Answer 144

activity, referred to as

Question 145

– Sectors – households, firms

Answer 145

& foreign sector