Explain how each of the following will affect the consumption and saving schedul

Question

Explain how each of the following will affect the consumption and saving schedules (as they relate to GDP) or the investment schedule:
a. A large increase in the value of real estate, including private houses.

b. A decline in the real interest rate.

c. A sharp, sustained decline in stock prices.

d. An increase in the rate of population growth.

e. The development of a cheaper method of manufacturing computer chips.

f. A sizable increase in the retirement age for collecting Social Security benefits.

g. An increase in the Federal personal income tax.

Explanation / Answer

(a)    If this simply means house holda have become more wealthy,then consumption will increase at each income level.the consumption schedule should shift upwards and the saving schedules shift downward. The investment schedule may shift right ward if owners of existing home sell them & invest in construction of new homes more than previously

(b)   The decline in the real intrest rate will increase intrest-consumer spending .the consumption schedule will shift up and the saving schedule down. Investors will increase investment as they move down the investment

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