Questions 29 - 31: For each of the following, describe the change in CONSUMPTION
ID: 1242457 • Letter: Q
Question
Questions 29 - 31: For each of the following, describe the change in CONSUMPTION (Write DECREASE or INCREASE.) that would result from each of the following changes in determinants. Assume that nothing else is changing besides the identified determinant.
29. A decrease in the value of the financial assets owned by consumers.
30.An increase in taxes paid by households.
31.A decrease in the level of real interest rates.
Questions 32 - 34: For each of the following, describe the change in INVESTMENT (Write DECREASE or INCREASE.) that would result from each of the following changes in determinants. Assume that nothing else is changing besides the identified determinant.
32.An expectation of a recession.
33.An increase in labor costs.
34.A new technology used to produce goods is developed.
Questions 35 - 39: For each of the following, give the way in which each of the following determinants would have to change (Write DECREASE or INCREASE.) if it was causing a DECREASE in AGGREGATE DEMAND. Assume that nothing else is changing besides the identified determinant.
35. consumer wealth
36. real interest rates
37. national income in countries abroad
38. government spending
39. business taxes
Explanation / Answer
29. Decrease in the value of financial assets will lead to decrease in the consumption by people. 30. taxes if increased will lessen the disposable income of the people resulting in decrease in consumption. (however some consumers still may like to consume the same amount as earlier and in that case they will reduce their savings) 31. interest rates decline this implies people can borrow from banks mmore comfortably resulting in increase in consumption because of decline in rates people will borrow more and consume. 32. Decrease in investment because of recession their projects may not give cash flows as expected when there was no recession. Hence, the investment will decline over gloomy scenario 33. Labor costs increase will result in higher costs of production and if inflaionary system exists and the producers can easily transfer this burden to the consumers then there will not be a decrease in the investment otherwise there might be a decline in investment 34. new technology is efficient and cost effective. investment will increase in that area. I hope this helps. There are too many questions :( Sorry.. Do rate me.. Not enough time left to answer. Require ratings.. Thank you Do rate me.
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