Develop a more detailed (than the basic one presented in the text) model of household consumption spending. Explain and
Posted: Sun Jun 05, 2022 4:00 pm
Develop a more detailed (than the basic one presented in
the text) model of household consumption spending. Explain and
justify your model.
Give the intuition behind the multiplier. Give examples of
activities that you suspect might produce a small multiplier effect
and another that might have a large effect.
Using the simple household model
C=c0 +c1(Y-t), assume that
c0 is $1000, taxes are $100, and
c1 is .5. What would be the impact on consumption
spending if household incomes were to rise by $500? (You can ignore
any multiplier effects here.) What if taxes were to fall by
$50?
the text) model of household consumption spending. Explain and
justify your model.
Give the intuition behind the multiplier. Give examples of
activities that you suspect might produce a small multiplier effect
and another that might have a large effect.
Using the simple household model
C=c0 +c1(Y-t), assume that
c0 is $1000, taxes are $100, and
c1 is .5. What would be the impact on consumption
spending if household incomes were to rise by $500? (You can ignore
any multiplier effects here.) What if taxes were to fall by
$50?