1 / 5

Mr. Weiss

Mr. Weiss. Section 3 – Module 21.

aaralyn
Download Presentation

Mr. Weiss

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Mr. Weiss Section 3 – Module 21 • 1. In Mainland, a small, closed economy with no government sector, when disposable income is $800, consumer spending is $800, and when disposable income is $1,800, consumer spending is $1,600. Assume that the aggregate price level and the interest rate are fixed in mainland. • What is the value of autonomous consumer spending in Mainland? • What is the value of the MPC in Mainland? • What is the consumption function in Mainland?

  2. Mr. Weiss Section 3 – Module 21 a. The value of autonomous consumer spending in Mainland is $160. To find this value, first recall that the consumption function can be written as C=A + MPC x YD. Next, find the MPC, which is the change in consumer spending divided by the change in disposable income, or 800/1000= 0.8., substitute one of the consumer spending and disposable income combinations into the consumption function to find the value of autonomous consumer spending: thus, C=A + 0.8 x YD and 800 = A + (0.(8) x (800) or A = $160.

  3. Mr. Weiss Section 3 – Module 21 1. In Mainland, a small, closed economy with no government sector, when disposable income is $800, consumer spending is $800, and when disposable income is $1,800, consumer spending is $1,600. Assume that the aggregate price level and the interest rate are fixed in mainland. b. What is the value of the MPC in Mainland? b. The MPC is 0.8. (See part A answer).

  4. Mr. Weiss Section 3 – Module 21 1. In Mainland, a small, closed economy with no government sector, when disposable income is $800, consumer spending is $800, and when disposable income is $1,800, consumer spending is $1,600. Assume that the aggregate price level and the interest rate are fixed in mainland. c. What is the consumption function in Mainland? c. The consumption function is C=160 + 0.8 x YD. See part A.

  5. Mr. Weiss Section 3 – Module 21

More Related