KW_Macro_Ch_11_End_of_Chapter_Problems

KW_Macro_Ch_11_End_of_Chapter_Problems - chapter 11 >...

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>> Income and Expenditure chapter 11 1. Economists observed the only five residents of a very small economy and estimated each one’s consumer spending at various levels of current disposable income. The accompanying table shows each resident’s consumer spending at three income levels. Individual consumer Individual spending by current disposable income $0 $20,000 $40,000 Andre 1,000 15,000 29,000 Barbara 2,500 12,500 22,500 Casey 2,000 20,000 38,000 Declan 5,000 17,000 29,000 Elena 4,000 19,000 34,000 PROBLEMS
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a. What is each resident’s consumption function? What is the marginal propensity to consume for each resident? b. What is the economy’s aggregate consumption function? What is the marginal propen- sity to consume for the economy? 2. From 2000 to 2005, Eastlandia experienced large fluctuations in both aggregate consumer spending and disposable income, but wealth, the interest rate, and expected future dispos- able income did not change. The accompanying table shows the level of aggregate consumer spending and disposable income in millions of dollars for each of these years. Use this infor- mation to answer the following questions. a. Plot the aggregate consumption function for Eastlandia. What is the aggregate consumption function? c. What is the marginal propensity to consume? What is the marginal propensity to save? Disposable income Consumer spending Year (millions of dollars) (millions of dollars) 2000 $100 $180 2001 350 380 2002 300 340 2003 400 420 2004 375 400 2005 500 500 2 CHAPTER 11 PROBLEMS
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3. How will each of the following actions affect the aggregate consumption function? Explain
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KW_Macro_Ch_11_End_of_Chapter_Problems - chapter 11 >...

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