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

Monetary policy , Under what conditions does the text explain that monetary...

Under what conditions does the text explain that monetary policy is neutral? If it is neutral under these conditions, why is it still an important economic policy tool? Your answer

Classical and non-classical model, what is the difference between classical...

what is the difference between classical and non-classical model

Three independent variables, In a regression analysis, three independent va...

In a regression analysis, three independent variables are used in the equation based on a sample of forty observations. What are the degrees of freedom associated with the F-statis

What do you mean by patulin, Q. What do you mean by Patulin? It is a to...

Q. What do you mean by Patulin? It is a toxic and antibiotic metabolite produced by several species of Penicillin, Aspergillus and Paeciliomyces but the most important in the c

Unemployment, Suppose that between January 2011 and January 2012 the total ...

Suppose that between January 2011 and January 2012 the total number of people employed and the unemployment rate both fell. Briefly explain how this is possible. [2 marks]

International trade, difference between mercantilism and absolute advantage...

difference between mercantilism and absolute advantage

Circular flow of income in an open economy, explain the effects of various ...

explain the effects of various injections and withdrawals and show the equilibrium in the circular flow

Feds actions on gdp impact, Suppose the banking system has reserves of $750...

Suppose the banking system has reserves of $750,000, demand deposits of $2,500,000 and a reserve requirement of 20%. a) If the Fed now purchases $125,000 worth of government bon

Review of economic literature, The project has been split into four main ch...

The project has been split into four main chapters; literature review, data and methodology, results and a conclusion. The appendix contains the estimated tables and graphs, of whi

Homework 5, Instructions For the following 10 questions, consider an eco...

Instructions For the following 10 questions, consider an economy which is initially in equilibrium without a tax, with P* of $90 and Q* of 10. Later, a tax is put on the market

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