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PP_Slides_Class_7_Monday_February_4

# PP_Slides_Class_7_Monday_February_4 - Good Afternoon Class...

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Good Afternoon!! Class 7 Monday, February 4

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1. The consumption function tells us that as income rises, consumption a. declines b. remains the same c. rises more slowly than income d. rises more quickly than income
1. At the point where the C line crosses the 45-degree line, saving is a. positive b. negative c. zero d. there is not enough information to know this

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1. If disposable income were to fall from 6,000 to 5,000 a. induced consumption would fall b. induced consumption would stay the same c. induced consumption would rise d. there is not enough information to determine whether induced consumption would rise, fall, or stay the same
Disposable income Consumption 0 \$200 bil \$200 bil 300 bil 400 bil 400 bil 600 bil 500 bil 800 bil 600 bil 1. How much is autonomous consumption when disposable income is \$800 bil? a. 0 b. \$200 bil c. \$400 bil d. \$600 bil e. cannot be determined

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Disposable income Consumption 0 \$200 bil \$200 bil 300 bil 400 bil 400 bil 600 bil 500 bil 800 bil 600 bil 5. How much is induced consumption when disposable income is \$800 bil? a. 0 b. \$200 bil c. \$300 bil d. \$400 bil e. \$600 bil
Considering: disposable income or income after taxes What can you do with disposable income? disposable income = consumption + saving

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disp inc cons sav disp inc disp inc disp inc = +
1 = APC + APS average propensity to consume APC average propensity to save APS

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When use concept? 1. Across time in a given country 2. Across countries at a given time
1. Across time in a given country

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Savings as a Percentage of Disposable Personal Income 1984-2005
in United States APS was -.005 in 2005 which means APC was 1.005 in 2005 how do this?

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2. Across countries at a given time
Average Propensity to Consume, Selected Countries, 2006 Forecast

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Household Saving as a Percentage of Disposable Income, 2006 Forecast
1. Which statement is true?

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PP_Slides_Class_7_Monday_February_4 - Good Afternoon Class...

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