Reference no: EM131079307
Homework 10-New
1) In a precise and detailed essay explain the Life-Cycle Theory of Consumption.
2) Consider the following Keynesian consumption function:
C = 2,500 + 0.80Y
Where C is consumption expenditure and Y is disposable income. Consider two families:
Family A: Y = $100,000
Family B: Y = $20,000
a) Calculate the Average Propensity to Consume (APC) for two families.
b) Which family has a larger APC? Explain the APC difference.
3) Consider the following life-cycle consumption function:
C = 2,500 + 0.80Y + 0.05W + 0.70G
Where W is the family wealth and G is average age of the parents. Consider the same two families:
Family A: Y = $100,000 W = $1,000,000 G = 600 months
Family B: Y = $20,000 W = -30,000 G = 336 months
a) Calculate the Average Propensity to Consume for two households
b) Which family has a larger APC? Use the Life-Cycle Theory of Consumption to explain the APC difference.
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Which family has a larger apc explain the apc difference
: Calculate the Average Propensity to Consume for two households
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