This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: When someone consumes more, they are saving less. If someone consumes less, they are consuming more. This being so, when your consumption schedule shifts upward, your saving schedule shifts downward by an equal amount, and vice versa. The exception is a change in personal taxes. When these change, your disposable income changes, and, therefore, your consumption and saving both change in the same direction and opposite to the change in taxes. 6. In what direction will each of the following occurrences shift the investment demand curve, other things equal? a. Left b. Right c. Right d. Left e. Right 10. Why is the actual multiplier in the U.S. economy less than the multiplier in this chapter’s example? The actual multiplier is smaller because it includes other leakages from the spending and income cycle besides just saving. Imports and taxes reduce the flow of money back into spending on domestically produced output, reducing the multiplier effect....
View Full Document
- Spring '08
- Economics, consumption schedule