Econ 204 Homework 3 (Part I)
1. The graph below characterizes a simple economy with only two components of aggregate
expenditures, consumption and investment.
a. How much is planned investment? How do you know? Consumption is $10,000 and
1. During an economic downturn, households respond to a decline in income by
B) reducing consumption.
2. Suppose when disposable personal income increases from $10,000 to $15,000, consumption
$12,000. What is the marginal propensity to consume?