Best writers. Best papers. Let professionals take care of your academic papers

Order a similar paper and get 15% discount on your first order with us
Use the following coupon "FIRST15"
ORDER NOW

Part I. Essay Question (40 points). One page (or max.

/in /by

Part I. Essay Question (40 points). One page (or max. two) is expected (no additional references needed for this essay question, the textbook will be enough, I am mostly interested in your own explanation).

Explain the multiplier process, how it is computed, and why it operates in both directions. Support your response with either formulas and/or an example.

Part II. Analytical Questions (60 points total/15 points each). Please include all calculations when needed.

Question No.1

Remember: Average Propensity to Consume (APC)/Income; Average Propensity to Save (APS) = Savings/Income; Saving (S) + Consumption (C) = Income.

Please show your calculations for (a) to (d):

  • If disposable income is $3,000 and savings $1,200, how much is the average propensity to consume?
  • If disposable income increases from $250 to $300 and saving increases from $40 to $50, how much is the average propensity to save?
  • If your income is $35,000 and the average propensity to save is 0.46, what is consumption?
  • If you spend $35,000 and your income is $60,000, what is your average propensity to save?

Question No.2

Remember: Marginal Propensity to Consume (MPC) = Change in Consumption/Change in Income (or ∆C/∆I); Marginal Propensity to Save (MPS) = Change in Savings/Change in Income (or ∆S/∆I); MPC + MPS ; see Question 1 for reminder of definitions for APC and APS.

Based on the information in the following table:

Income            Consumption         Saving

$30,000                 $30,000           0

40,000                   35,000             5,000

50,000                   40,000             10,000

  • What is the Marginal Propensity to Consume?
  • Since the APC varies with income level, what is the Average Propensity to Consume at income level I=$40,000?
  • What is the Marginal Propensity to Save?
  • Since the APS varies with income level, what is the Average Propensity to Save at income level I=$40,000?

Question No.3 (Chapter 10, suggested reading pp.244-246)

In 1962 in a speech before the Economic Club of New York, President Kennedy argued that “…it is a paradoxical truth that taxes are too high today and tax revenues are too low – and that the soundest way to raise revenues in the long run is to cut rates now” Is President Kennedy’s argument consistent with supply-side economics? Why or why not?

Question No.4 (Chapter 10, suggested reading pp.239-241)

Policymakers are debating what to do about a recession. One group wants to offer each citizen a tax rebate of $600. Another group wants to increase government spending in the amount of $600 per citizen. Which policy would introduce more spending into the economy? Why?

 
Looking for a Similar Assignment? Order now and Get 10% Discount! Use Coupon Code "Newclient"