1.

Question :
Summarize the budget patterns for food, clothing, luxuries, and saving.
Answer:
Dalam perkembangan-perkembangan yang terjadi dalam masyarakat sekitar, tentunya
mengalami banyak pula perubahan yang terjadi pada faktor-faktor ekonomi . Disaat
pendapatan yang diterima mengalami kenaikan, maka pengeluaran-pengeluaran juga akan
mengalami kenaikan. Seperti yang terjadi pada makanan dan pakaian. Semakin banyak
pendapatan yang diterima, maka pengeluaran tersebut akan menambah daya beli barang-
barang normal, makanan-makanan mahal, pakaia yang layak, dan juga menambah
kemewahan yang dikenakan seseorang tersebut. Dengan bertambahnya pendapatan maka
akan mengurangi daya beli yang terjadi pada barang-barang inferior, seperti nasi karak,
sandal jepit, baju-baju yang kurang bagus. Dengan naiknya pendapatan, maka jumlah
pajak yang berlaku juga akan mengalami kenaikan pula. Jika seseorang memiliki
tambahan pendapatan yang diperoleh setelah pajak, sebagian dari pendapatan itu akan
dimasukan dalam tabungan.

Dalam hukum Engel dijelaskan mengenai pola budget sebagai berikut :

a. Jika pendapatan meningkat, maka presentasi pengeluaran untuk konsumsi pangan
semakin kecil.
b. Presentase pengeluaran untuk konsumsi pakaian relatif tetap dan tidak bergantung
pada tingkat pendapatan.
c. Presentase pengeluaran konsumsi untuk pengeluaran rumah relatif tetap dan tidak
bergantung pada tingkat pendapatan
d. Jika pendapatan meningkat, maka presentase pengeluaran untuk pendidikan,
kesehatan, rekreasi, barang mewah, dan tabungan akan meningkat.

Saving
Medical care and other

Transportation

Housing
Food
3.Question :
Exactly how were the MPC and MPS in Table 21-4 computed? Illustrate by calculating MPC and MPS
between points A and B . Explain why it must always be true that
MPC + MPS = 1 .

Answer :
Along with the marginal propensity to consume goes its mirror image, the marginal propensity to save,
or MPS . The marginal propensity to save is defi ned as the fraction of an extra dollar of disposable
income that goes to extra saving. Why are MPC and MPS related like mirror images? Recall that
disposable income equals consumption plus saving. This implies that each extra dollar of disposable
income must be divided between extra consumption and extra saving. Thus if MPC is 0.80, then MPS
must be 0.20. (What would MPS be if MPC were 0.6? Or 0.99?) Comparing columns (3) and (5) of
Table 21-4 confi rms that at any income level, MPC and MPS must always add up to exactly 1, no more
and no less. MPS+MPC =1, always and everywhere.

5. Question :
Estimate your income, consumption, and saving for last year. If you dissaved (consumed more than your
income), how did you finance your dissaving? Estimate the composition of your consumption in terms of
each of the major categories listed in Table 21-1.

Answer :

The break-even point —where the representative household neither saves nor dissaves but consumes
all its income—comes at $25,000. Below the Consumption and saving rise with disposable income. The
break-even point at which people have zero saving is shown here at $25,000. How much of each extra
dollar of income do people devote to extra consumption at this income level? How much to extra
saving? (Answer: 80 cents and 20 cents, respectively, when we compare row B and row C.)
break-even point, say, at $24,000, the household actually consumes more than its income; it dissaves
(see the $200 item). Above $25,000 it begins to show positive saving
[see the

$200 and other positive items. the consumption spending for each income level. Since each dollar of
income is divided between the part consumed and the remaining part saved a, are not independent;
they must always exactly add up. To understand the way consumption affects national output, we need
to introduce some new tools. We need to understand how each dollar of additional income is divided
between additional saving and additional consumption. This relationship is shown by:
● The consumption function, relating consumption and income
● Its twin, the saving function, relating saving and income

7. Question :
“Changes in disposable income lead to movements along the consumption function; changes in wealth
or other factors lead to a shift of the consumption function.” Explain this statement with an illustration
of each case.

Answer :
“Along the consumption function, income changes more than consumption.” What does this imply for
the MPG and MPS? 7. “Changes in disposable income lead to movements along the consumption
function; changes in wealth or other factors lead to a shift of the consumption function.” Explain this
statement with an illustration of each case
.”Along the consumption function, income changes more than consumption.”. It implies that MPC and
MPS <1 Changes in disposable income cause movement along the consumption function: higher
incomes move people out further from the vertical axis, and lower incomes move people in closer to
vertical axis. Changes in wealth cause the entire... n to shift: higher wealth shifts the curve up as people
spend higher proportions of their disposable income at every level,and lower wealth shifts the curve
down as people spend lower proportions of their disposable income at every level.

9. Question :
Using the augmented investment demand schedu le from question 8(c) and assuming that the interest
rate is 10 percent, calculate the level of investment for cases
a through d in question 8.

Answer :
projects A through G would be profi table. We would thus expect profi t-maximizing fi rms to invest in
all seven projects, which [from column (2)] total up to $55 million in investment. Thus at a 5 percent
interest rate, investment demand would be $55 million. However, suppose that the interest rate rises
to 10 percent. Then the cost of fi nancing these investments would double. We see from column (6) that
investment projects F and G become unprofi table at an interest rate of 10 percent; investment demand
would fall to $30 million. We show the results of this analysis in Figure 21-8. This figure shows the
demand-for-investment schedule, which is here a downward-sloping step function of the interest rate.
This schedule shows the amount of investment that would be undertaken at each interest rate; it is
obtained by adding up all the investments that would be profi table at each level of the interest rate.
Hence, if the market interest rate is 5 percent, the desired level of investment will occur at point
M , which shows investment of $55 million. At this interest rate, projects A through G are undertaken. If
interest rates were to rise to 10 percent, projects F and G would be squeezed out; in this situation,
investment demand would lie at point M’ with total investment of $30 million.