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Chapter 12: Q. 1 (page 274)

How could toughened federal regulations of businesses during the current decade have inhibited a rightward shift in the imvestment function?

Short Answer

Expert verified

Changes in real disposable income produced movement along the consumption function, while shifts in the consumption function were induced by changes in household net worth.

Step by step solution

01

Introduction

The recovery of household expenditure on services has always been slower than for the recovery of household expenditure on tangible commodities. During the recovery following the conclusion of the $2007 - 2009$ depression, nonetheless, this disparity was substantially more pronounced.

02

Conclusion

Simultaneous movement along and shifts in the consumption function account for observed changes in projected aggregate consumption spending.

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Most popular questions from this chapter

Assume that the multiplier in a country is equal to $4$ and that autonomous real consumption spending is $\(1$ trillion. If current real GDP is $\) 18$ trillion, what is the current value of real consumption spending?

At an initial point on the aggregate demand curve, the price level is $125$ , and real GDP is $S 18$ trillion. When the price level falls to a value of $120$ , total autonomous expenditures increase by $\(250$ billion. The marginal propensity to consume is $\) 0.7$ . What is the level of real GDP at the new point on the aggregate demand curve?

Consider the following diagram, which depicts a country with no government expenditure, taxes, or net exports. Answer the following questions and explain your responses using the information in the diagram.

a. What is the marginal saving propensity?

a. What is the current level of projected investment spending over the next few years?

c. What is the current period's equilibrium level of real GDP?

d. What is the current period's saving equilibrium level?

e. What will the change in equilibrium real GDP be if planned investment spending for the current period is increased by $$ 25$ billion? What will the new real GDP equilibrium level be if all other variables, including the price level, remain constant?

The multiplier in a country is equal to $5$ , and households pay no taxes. At the current equilibrium real GDP of $\(14$ trillion, total real consumption spending by households is $\) 12$ trillion. What is real autonomous consumption in this country?

At an initial point on the aggregate demand curve, the price level is $125$ , and real GDP is $\(18$ trillion. When the price level falls to a value of $120$ , total autonomous expenditures increase by $\) 250$ billion. The marginal propensity to consume is $0.75$ . What is the level of real GDP at the new point on the aggregate demand curve?

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