question
The consumption function shows the relationship between:
answer
consumption and income, other things constant.
question
The marginal propensity to consume is defined as the _____.
answer
change in consumption spending divided by the change in disposable income
question
Which of the following statements is true of the relationship between household consumption and disposable income?
answer
Household consumption is directly related to disposable income.
question
The marginal propensity to save refers to the:
answer
change in savings divided by the change in disposable income.
question
cenario 9.1. Consider the following hypothetical situation. The disposable income of a household increases from $50,000 to $62,000 in a year. The household increases its consumption expenditure from $40,000 to $45,000 and saves $17,000 instead of $10,000.
The value of the marginal propensity to consume for the household is approximately _____.
The value of the marginal propensity to consume for the household is approximately _____.
answer
Marginal propensity to consume is defined as the change in consumption divided by the change in income. In this case, the change in consumption
40,000-45,000= 5000
50,000-62,000= 12,000
5,000/12,000= 0.41
40,000-45,000= 5000
50,000-62,000= 12,000
5,000/12,000= 0.41
question
Scenario 9.1. Consider the following hypothetical situation. The disposable income of a household increases from $50,000 to $62,000 in a year. The household increases its consumption expenditure from $40,000 to $45,000 and saves $17,000 instead of $10,000. _____ is the marginal propensity to save for the household.
answer
Marginal propensity to save is defined as the change in saving divided by the change in income. In this case,
the change in saving= $7,000
the change in income = $12,000.
Therefore, MPS = 7,000/12,000 = 0.58
the change in saving= $7,000
the change in income = $12,000.
Therefore, MPS = 7,000/12,000 = 0.58
question
Marginal propensity to save (MPS) is equal to:
answer
1 ─ MPC
question
Suppose the marginal propensity to consume is 0.8 for a household. The household's marginal propensity to save is _____.
answer
The marginal propensity to consume plus the marginal propensity to save sum to 1. So, marginal propensity to save = 1 - 0.8 = 0.2
question
The slope of the consumption function is equal to the _____.
answer
marginal propensity to consume
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