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

Overnight rates and interest rates with longer maturity, Q. Overnight rates...

Q. Overnight rates and interest rates with longer maturity? By controlling overnight interest rates, central bank will affect interest rates with longer maturity. Main reason f

What is productivity or average product, What is productivity? Produ...

What is productivity? Productivity or average product (AP): It is output person which is output divided through number of workers AP= Q/L. There labour Productivity can

Consumption function in the IS-LM model, Q. Consumption function in the IS-...

Q. Consumption function in the IS-LM model? The consumption function will be the same as in cross model, consumption will depend positively on Y. In the classical model, consum

Give detail explanation of exchange rate, Give detail explanation of Exchan...

Give detail explanation of Exchange Rate In most countries, exchange rate is expressed using foreign currency as base currency. For instance, in Denmark, USD exchange rate woul

Money multiplier, what is money multiplier? what is role , importance, adva...

what is money multiplier? what is role , importance, advantages , disadvantages , limitations and examples of money multiplier?

What is cost-push inflation, What is Cost-push inflation Cost-push infl...

What is Cost-push inflation Cost-push inflation takes place when costs of production increase causing short-run aggregate supply curve to shift to left. The main causes of c

Opportunity costs associated, The opportunity costs associated with the use...

The opportunity costs associated with the use of resources owned by a firm are: a. externalities b. implicit costs c. explicit costs d. sunk costs

Eco, illustrate and discuss the implications of various market structures (...

illustrate and discuss the implications of various market structures (competitive and non-competitive)for price determination.

Show the advantage and disadvantage of money, Q. Show the advantage and dis...

Q. Show the advantage and disadvantage of money? Money has one significant advantage and one disadvantage compared to bonds:  · Advantage: Money is more liquid than bond

Describe short-run equilibrium price-demand, The aim of this task is to exp...

The aim of this task is to explore the effects of a supply shock on a firm and thereby on the industry. Suppose that war breaks out in the Middle East, where a considerable portion

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