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Chapter 8 assignment
1.
a. The consumption schedule or curve shows how much households plan to consume at
b. The saving schedule or curve shows how much households plan to save at various levels
c. The investment demand curve shows how much will be invested at all possible interest
rates, given the expected rate of net profit from the proposed investments.
d. The multiplier effect shows how an initial change in spending can flow through the
2.
a. If each household has become richer, then consumption will increase at each income
level.
b. The decline in the real interest rate will increase interest-sensitive consumer spending
d. The increase in the rate of population growth will, over time, increase the rate of
income growth.
f. The postponement of benefits may cause households to save more if they planned to
3.
a. The multiplier effect describes how an initial change in spending ripples through the
d. The multiplier values for the MPS values: undefined, 2.5, 1.67, and 0.
e. The multiplier values for the MPC values: undefined, 10, 3 (approx. actually 3.03), 2, 0.