27.1 What are the variables (the items measured on the axes) in a graph of the (a) consumption schedule and (b)
saving schedule? Are the variables inversely (negatively) related or
are they directly (positively) related? What is the fundamental reason
that the levels of consumption and saving in the United States are each
higher today than they were a decade ago?
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27.2 Precisely
how do the MPC and the APC differ? How does the MPC differ from the
MPS? Why must the sum of the MPC and the MPS equal 1?
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27.3 In what direction will each of the following occurrences shift the consumption and saving schedules, other things equal?a. A large decrease in real estate values, including private homes.b. A sharp, sustained increase in stock prices.c. A 5-year increase in the minimum age for collecting Social Security benefits.d. An economy-wide expectation that a recession is over and that a robust expansion will occur.e. A substantial increase in household borrowing to finance auto purchases.
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27.4 Why
does a downshift of the Consumption schedule typically involve an equal
upshift of the saving schedule? What is the exception to this
relationship?
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27.5 Why will a reduction in the real interest rate increase investment spending, other things equal?
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27.6 In what direction will each of the following occurrences shift the investment demand curve, other things equal?a. An increase in unused production capacity occurs.b. Business taxes decline.c. The costs of acquiring equipment fall.d. Widespread pessimism arises about future business conditions and sales revenues.e. A major new technological breakthrough creates prospects for a wide range of profitable new products.
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27.7 How is it possible for investment spending to increase even in a period in which the real interest rate rises?
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27.8 Why is investment spending unstable?
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27.9 Is
the relationship between changes in spending and changes in real GDP in
the multiplier effect a direct (positive) relationship or is it an
inverse (negative) relationship? How does the size of the multiplier
relate to the size of the MPC? The MPS? What is the logic of the
multiplier-MPC relationship?
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27.10 Why is the actual multiplier in the U.S. economy less than the multiplier in this chapter's example?
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27.11 LAST WORD
What is the central economic idea humorously illustrated in Art
Buchwald's piece, "Squaring the Economic Circle"? How does the central
idea relate to economic recessions, on the one hand, and vigorous
economic expansions, on the other?
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