The above figure shows a consumption function and a 45-degree line. Real consumption is a function of disposable income
Why is real GDP used here instead? What is measured along the vertical axis? What is measured by point B? Explain the significance of point A.
Real disposable income is less than real GDP, but can be derived from real GDP. If we assume that real disposable income is the same proportion of real GDP every year, then the change is appropriate. Real GDP is used because we want to find the equilibrium real GDP. Planned consumption expenditures are measured on the vertical axis, and point B measures autonomous consumption. At A, planned consumption spending equals real GDP. Saving equals zero at point A.
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Which of the following taxes would result in the greatest tax burden for buyers?
a. A tax on pharmaceuticals b. A tax on luxury cars c. A tax on movie tickets d. A tax on restaurant meals
It took several decades for advances in computer technology to have a significant impact on the economy. This illustrates the fact that
A. technologies cannot have an impact until government regulation catches up. B. people are initially irrationally suspicious of new technology and refuse to accept it until some time has passed. C. technologies need to mature before they reach the point where they can have an impact. D. new technology is not really needed; it tends to be a way for retailers to boost sales by selling people things they do not really need.