ECON 20 Lecture Notes - Lecture 13: Demand Curve, Real Interest Rate, Technological Change
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(Answer the following questions based on the given data.) **Please show work/formulas**
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Key: DI = Disposable Income, C=Consumption, S=Saving, APC = Average Propensity to Consume, APS=Average Propensity to Save | ||||||||||||
MPC=Marginal Propensity to Consume, MPS=Marginal Propensity to Save |
2. | What are the 2 main tools the government can use with fiscal policy? |
3. | What is the goal of expansionary fiscal policy and how is it achieved? |
4. | What is the current level of total public debt for the United States, and what percent is foreign-owned? |
The following table is a consumption schedule. Assume taxes and transfer payments are zero and that all saving is personal saving.
(GDP = DI) |
C |
S |
APC |
APS |
$1,500 |
$1,540 |
$_____ |
1.027 |
–0.027 |
$1,600 |
$1,620 |
_____ |
1.013 |
–0.013 |
$1,700 |
$1,700 |
_____ |
_____ |
_____ |
$1,800 |
$1,780 |
_____ |
0.989 |
0.011 |
$1,900 |
$1,860 |
_____ |
0.979 |
0.021 |
$2,000 |
$1,940 |
_____ |
_____ |
_____ |
$2,100 |
$2,020 |
_____ |
0.962 |
0.038 |
$2,200 |
$2,100 |
_____ |
_____ |
_____ |
Compute saving at each of the eight levels of disposable income and the missing average propensities to consume and to save.
1. The break-even level of disposable income is $________.
2. As disposable income rises, the marginal propensity to consume remains constant. Between each two GDPs the MPC can be found by dividing $________ by $________, and is equal to _______.
3. The marginal propensity to save also remains constant when the GDP rises. Between each two GDPs the MPS is equal to $________ divided by $________, or to _______.