Real Disposable Consumption
Income (billions) Expenditures (billions) Saving (billions)
$100 $150 ______
200 200 ______
300 250 ______
400 300 ______
with the answers how would i do this?
a. Graph the consumption function with consumption spending on the
vertical axis and disposable income on the horizontal axis.
b. If the consumption function is a straight line, what is its slope?
c. Fill in the saving column at each level of income. If the saving
function is a straight line, what is its slope?
a) put income on the x-axis, consumption (and savings) on the y-axis. At x=100 and y=150 put a dot. At x=200 and y=200 put another dot. Repeat for 300 and 400. Connect the dots.
b) slope is rise over run. With each 100 increase in income (run), consumption goes up by 50 (rise). So, 50/100 = .5 = slope
c) repeat for savings
Savings = income - expenditures. So, for the first example savings =-50
a) put income on the x-axis, consumption (and savings) on the y-axis. At x=100 and y=150 put a dot. At x=200 and y=200 put another dot. Repeat for 300 and 400. Connect the dots.
b) slope is rise over run. With each 100 increase in income (run), consumption goes up by 50 (rise). So, 50/100 = .5 = slope
c) repeat for savings
To calculate the missing values for expenditures and saving, we need to understand the concept of real disposable consumption income.
Real Disposable Consumption Income is the income that individuals have available to spend or save after taxes and accounting for inflation. It represents the amount of money individuals have at their disposal to use for consumption or saving.
To calculate expenditures, we can subtract saving from real disposable consumption income, as expenditures include both consumption and saving. To calculate saving, we can subtract expenditures from real disposable consumption income, as saving is the portion of income that is not spent.
Let's calculate the missing values:
For the first row:
Real Disposable Consumption Income = $100 billion
Expenditures = Real Disposable Consumption Income - Saving
Expenditures = $100 billion - $150 billion = -$50 billion
Since expenditures cannot be negative, we can assume that the saving value is incorrect or incomplete for the first row.
For the second row:
Real Disposable Consumption Income = $200 billion
Expenditures = Real Disposable Consumption Income - Saving
Expenditures = $200 billion - $200 billion = $0 billion
Saving = Real Disposable Consumption Income - Expenditures
Saving = $200 billion - $0 billion = $200 billion
For the third row:
Real Disposable Consumption Income = $300 billion
Expenditures = Real Disposable Consumption Income - Saving
Expenditures = $300 billion - $250 billion = $50 billion
Saving = Real Disposable Consumption Income - Expenditures
Saving = $300 billion - $50 billion = $250 billion
For the fourth row:
Real Disposable Consumption Income = $400 billion
Expenditures = Real Disposable Consumption Income - Saving
Expenditures = $400 billion - $300 billion = $100 billion
Saving = Real Disposable Consumption Income - Expenditures
Saving = $400 billion - $100 billion = $300 billion
So, the missing values for expenditures and saving are as follows:
Row 1: Expenditures = Unknown, Saving = Unknown
Row 2: Expenditures = $0 billion, Saving = $200 billion
Row 3: Expenditures = $50 billion, Saving = $250 billion
Row 4: Expenditures = $100 billion, Saving = $300 billion