1. Complete the accompanying table. Level of output and income (GOP-D) Consumpti
ID: 1155575 • Letter: 1
Question
1. Complete the accompanying table. Level of output and income (GOP-D) Consumption Saving APC APS MPC MPS $100 125 150 175 200 225 250 275 300 10 (a) What is the break-even level of income? How is it possible for households to dissave at very low income levels? (b) If the proportion of total income consumed decreases and the proportion saved increases as income rises, explain how the MPC and MPS can be constant at various levels of income. Other things being constant, what will be the effect of each of the following on consumption and saving schedules? (a) Credit card companies increase the interest-free periods on their cards to compete for customers. (b) Concern grows over rising prices. (c) A weakening of the housing market lowers home values. (d) Real interest rates fall. (e) Congress officially approves the President's plan for tax cuts. Consider the following investment situations. (a) A local bookseller is considering expanding store space to increase his capacity for books. The 2. 3. rent for the additional space would cost $3000 per year. The bookseller predicts that the added space will pull in an additional profit of $4000 per year. The current interest rate is 12%. Should the bookseller invest in the extra space?Explanation / Answer
Breakeven Income is in which output equals consumption with zero savings
Hence 125 is breakeven level of income
people borrow when thier disposable income is less to meet their consiumption deeds
ANs b)
MPC is change in Consum[tion level with respect tp change in Income here change in consumption is same with each level of income therefore MPC is constant at 0.8 and MPS=1-MPC =0.2 therefore this is also constant
GDP=DI C S APC APS MPC MPS 100.00 105.00 -5.00 1.05 -0.05 125.00 125.00 0.00 1.00 0.00 0.80 0.20 150.00 145.00 5.00 0.97 0.03 0.80 0.20 175.00 165.00 10.00 0.94 0.06 0.80 0.20 200.00 185.00 15.00 0.93 0.08 0.80 0.20 225.00 205.00 20.00 0.91 0.09 0.80 0.20 250.00 225.00 25.00 0.90 0.10 0.80 0.20 275.00 245.00 30.00 0.89 0.11 0.80 0.20 300.00 265.00 35.00 0.88 0.12 0.80 0.20Related Questions
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