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

Define the prices and price level, Q. Define the Prices and price level? ...

Q. Define the Prices and price level? Prices are of great significance in macroeconomics as undeniably they are in microeconomics. Though in microeconomics we are more interest

Discuss about asymmetric information, A) With asymmetric information, free ...

A) With asymmetric information, free markets may not lead to efficient outcomes because the market for a service or product may break down due to adverse selection. Explain what ad

Define price elasticity of demand, Suppose the price elasticity of demand f...

Suppose the price elasticity of demand for used cars is estimated to be 3 what does this mean?

Explain about the lm curve, The LM curve  The LM curve ...

The LM curve  The LM curve shows all combinations of R and Y, where the money market is in equilibrium. The LM-curve slopes upwards. Mone

Determine the categories of finished goods, Determine the categories of fin...

Determine the categories of finished goods Finished goods in the goods market are divided into 4 categories: private consumption going to private sector, public consumption for

Subsequent withdrawals increase, What is the amount of five equal annual de...

What is the amount of five equal annual deposits that can provide five annual withdrawals, where a first withdrawal of $1500 is made at the end of year six and subsequent withdrawa

True or False, 1) Consumption is positively related to stock market wealth ...

1) Consumption is positively related to stock market wealth but negatively related to taxes and tax rates.

Economic luxury and an economic necessity, What is the difference between a...

What is the difference between an economic luxury and an economic necessity? Ans) An economic luxury is wasting land on pools huge garden, etc. An economic requirement is what y

Alternatives type of production, Production Alternatives Type of production...

Production Alternatives Type of production A B C D E Automobiles 0 2 4 6 8 Forklifts 30 27 21 12 0 If the economy is at point C, what is the (opportunity) cost of 2 more automobile

Consumption function in the as-ad model, Q. Consumption function in the AS-...

Q. Consumption function in the AS-AD model? Consumption. Suppose that P increases by say 10% whereas real GDP (Y) is constant. Nominal GDP and nominal national will now have

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