Problems & Exercises for MACRO

UNIT THREE (FOR EXAM THREE)

Unit Three--Assignment Three--Web Problem 1

Please send an e-mail response to each of the following questions about the consumption function.

If your monthly disposable income increased from $3,000 to $5,000, then what would you do with the extra $2,000 per month? Based on your answer, what is your MPC?

Suppose interest rates throughout the economy went up. This includes interest rates on home mortgage loans, car loans, boat loans, etc. What impact would this have on the consumption function?

Suppose your savings account balance increased from $5,000 to $350,000 as a result of an inheritance. Would you alter your consumption spending? Explain.