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Chapter 12 And Appendix B Assignment Use the following table to answer questions 1 -3. Disposable Income Total Consumption (billions of $/yr)(billionsof$/yr) $0 $300 $150 $440 What is the marginal propensity to consume (MPC) in the above table? .93 What is the marginal propensity to save (MPS) in the above table? .07 What is the consumption function consistent with the above data? C=.93Y+300 Given that autonomous consumption equals $1500, income equals $35,000, and the MPC equals .80, what is the level of consumption? Consumption=$29,500 If consumption is $560 and savings are 40, what is disposable income? $600 Suppose the consumption function is: C= $400 + .75Yd. What is the MPC? .75 What is the MPS? .25 What is C if disposable income is $800? $1,000 Answer the following questions from the Openstax textbook. Save and submit as a pdf or word document in Blackboard. 1. Name some government policies that could cause aggregate demand to shift. Government policies that could cause a shift in the aggregate demand include: reduction in government spending, increase in taxes, increase in government spending, and a decrease in taxes. 2. From a Keynesian point of view, which is more likely to cause a recession: aggregate demand or aggregate supply, and why? Aggregate demand is more likely to cause a recession. This is because consumers are not buying the products. Therefore, real GDP is lower than potential GDP. 3. What tradeoff does a Phillips curve show? 4. In the Keynesian framework, which of the following events might cause a recession? Which might cause inflation? a. A large increase in the price of the homes people own. Inflation b. Rapid growth in the economy of a major trading partner. Recession c. The development of a major new technology offers profitable opportunities for business. Recession d. The interest rate rises. Recession e. The good imported from a major trading partner become much less expensive. Recession
