Macrohomework4 - Macroeconomics Homework Chapter 9:1-12 1....

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Macroeconomics Homework Chapter 9:1-12 1. How would an increase in each of the following affect the consumption function? How would it affect the saving function? a. Autonomous net taxes- Will decrease consumption and savings because it reduces the amount of disposable income. b. The interest rate- A higher interest rate, other things constant, shifts the consumption function downward and the savings function upward. c. Consumer optimism or confidence- An increase in consumer confidence would increase consumption and decrease savings. d. The price level- An increase in the price level reduces the purchasing power of money holdings, causing households to consume less and save more. e. Consumer net wealth- An increase in consumer wealth would cause a shift up in both consumption and savings. f. Disposable income- Causes a movement up a given consumption function and a movement up a given savings function. 2. When the consumption function shifts the savings function can move up, down, or stay the same depending on what it is that caused the consumption function to shift. For example, if the consumption function shifted due to an increase in disposable income, the savings function will
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This homework help was uploaded on 04/21/2008 for the course ECONOMICS 2113 taught by Professor Kenmiller during the Spring '08 term at Oklahoma Christian.

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Macrohomework4 - Macroeconomics Homework Chapter 9:1-12 1....

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