Learn the toughest concepts covered in your Macroeconomics class with step-by-step video tutorials and practice problems.

Income and Consumption

1

Consumption Function (Consumption Schedule)

9m

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2

Marginal Propensity to Consume and Save

4m

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3

1 = MPC + MPS

2m

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4

Equation of the Consumption Function

2m

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5

Problem

Calculate the Marginal Propensity to Consume and the Marginal Propensity to Save using the following table:

6

Problem

If the Keynesian consumption function is C = 10 + 0.8 Yd then, if disposable income is $1000, what is amount of total consumption?

A

$0.80

B

$800

C

$810

D

$0.81

E

Cannot be determined

7

Problem

If the Keynesian consumption function is C = 10 + 0.8 Yd then, when disposable income is $1000, what is the marginal propensity to consume?

A

0.8

B

800

C

810

D

0.81

E

Cannot be determined

8

Problem

An increase in the marginal propensity to consume will:

A

Lead to the consumption function becoming steeper

B

Shift the consumption function upwards

C

Shift the consumption function downwards

D

Not affect the consumption function