Consumption and GDP, Macroeconomics

Assignment Help:

At first, it may seem obvious that consumption will rely on Y. If GDP is doubled in real terms over a number of years, government consumption, private consumption and investment will also each roughly be doubled. If you draw a graph of GDP and consumption over time you see that consumption does grow by about the same rate as GDP. 

Though from this reasoning, we can't conclude that C relies on the Y since growth has been removed from our variables C and Y. We need to think of Y as a variable which varies over time around some average. Sometimes it is above the average and sometimes it's below the average however there is now upward trend. The same is true for C.

The crucial question then is whether consumption is above its average in periods when GDP is above its average and vice versa (technically, if detrended variables are correlated over time).


Related Discussions:- Consumption and GDP

Lower price in restaurant, A restaurant/bar is analyzing its pricing of bee...

A restaurant/bar is analyzing its pricing of beer. It has determined that the price elasticity of demand for beer is 0.8, the cross-price elasticity for wine with respect to the pr

Central bank overnight interest rate, Q. Central bank overnight interest ra...

Q. Central bank overnight interest rate? Overnight interest rate is a significant interest rate for a central bank and it has methods of influencing this rate. In most nations,

Fiscal policy, Fiscal Policy An Increase in Government Spending: Fi...

Fiscal Policy An Increase in Government Spending: Figure 1 Let us examine how an increase in government spending affects the interest rate and the level of income.

Economic performance, This 24 year 1 quarter period should offer sufficient...

This 24 year 1 quarter period should offer sufficient insight into the short term and long term correlation between the variables. Figure - A graph showing the trend of

Average cost curve, A firm with a U-shaped average cost curve finds that it...

A firm with a U-shaped average cost curve finds that its revenues exceed its costs when it sets price equal to marginal cost. On which part of its average cost curve is the firm op

Rapidly rises housing prices, Why did housing prices rise rapidly during 20...

Why did housing prices rise rapidly during 2002-2005? Why did the mortgage default rate increase so sharply during 2006 and 2007 even before the 2008-2009 recession began?

Two-way anova., A scientist has been studying the organisms colonising the ...

A scientist has been studying the organisms colonising the pilings underneath a wharf in Sydney Harbour. He postulates two factors might make these communities of sponges, worms, a

Un employment, examine keynesian theory of un employment

examine keynesian theory of un employment

Determine what would be lowest bid of sfi , Snake Farm Inc. (SFI) has been ...

Snake Farm Inc. (SFI) has been offered to submit a competitive bid for building 31 and 22, 18, and 11offshore pits per year for Athletic Inc. over the next four years.  If the bid

What are the important aspects in tracking the macro-economy, What are the ...

What are the important aspects in tracking the macro-economy? Important aspects in tracking the macro-economy: a. How economists utilizes aggregate measures to track the pre

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd