How an increase in each the following will affect the Consumption Function. How will affect the Savings Function?
a) Net Taxes
b) Interest Rate
c)Consumer Optimism of Confidence
d) The Price Level
e) Consumer's Net Worth
f) Disposable Income
Notice that the problem is how an INCREASE will affect both the Consumption AND the Savings functions.
(Contractionary (or Recessionary) Gap) What does a Contractionary (or Recessionary in 8th edition) Gap imply about the actual rate of unemployment relative to the natural rate? What does it imply about the actual price level relative to the expected price level? What most happen to real and nominal wages in order close a contractionary gap?
Another one for thinking. Notice that it has 3 problems; the first two are about What Happens During a Contractionary Gap for Unemployment and Price Levels and the Third is about How It is Closed the CG. Two Steps.