Chapter 10

Chapter 10 - Chapter 10

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Chapter 10   The most direct way to answer this question is to remember that Disposable  Income = Consumption + Saving. So, if DI equals $1,000 and Saving equals  $200, then Consumption must be $800.  You can also look at patterns that exist in each column of the table. For example,  in column one, GDP and DI increase by $1,000 in each line. As income increases  from $2,000 to $3,000, consumption increases by $600. So, as income  decreases from $2,000 to $1,000, consumption should decrease by $600.  Because the function is linear, the slope is constant. Therefore, for a given  change in DI, the change in consumption or saving is the same everywhere.  Consumption is thus $800 when income is $1,000.  The most direct way to answer this question is to remember that Disposable  Income = Consumption + Saving. So, if DI equals $3,000 and Consumption  equals $2,000, then Saving must be $1,000.  Again, let's look at the patterns in the columns of the table. In column one, GDP  and DI increase by $1,000 in each line. As disposable income increases from  $1,000 to $2,000, saving increases from $200 to $600. So, as disposable income 
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This note was uploaded on 01/23/2010 for the course ECN 72570 taught by Professor Mendez during the Fall '09 term at ASU.

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Chapter 10 - Chapter 10

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