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

Lower tax rates, Is it true that government revenues are increased because ...

Is it true that government revenues are increased because of lower tax rates? Ans) It is true to a point. The Laffer curve determines that revenues enhance as the tax rates rise

Health care cost of capital, In 2004, Olentangy health care cost of capital...

In 2004, Olentangy health care cost of capital was 6%. Its investments on a historical cost valuation basis are $80,000; on a replacement cost basis are $100,000. And on a current

Analysis, provide data and analysis for the real GDP (as total and per capi...

provide data and analysis for the real GDP (as total and per capita) and its growth rate then draw a graph and identify the periods of the Malaysia’s business cycle 2007 -2011

What is the macroeconomic policy, Macroeconomic policy Macroeconomic p...

Macroeconomic policy Macroeconomic policy trade-offs are likely along the short-run Phillips curve however are not maintainable in the long run. In the short run a government

What are forms of price floors to lead inefficiency, What are forms of pric...

What are forms of price floors to lead inefficiency? Price floors frequently lead to ineffectiveness in the forms of: a. Inefficient allocation of sales in between sellers

Internatinal trade, how can a country maintain equilibrium GDP with foreign...

how can a country maintain equilibrium GDP with foreign trade?

NATIONAL INCOME VARIATION, give and explain the different causes of nationa...

give and explain the different causes of national income variation

What is trade liberalisation, What is Trade liberalisation Trade liber...

What is Trade liberalisation Trade liberalisation is the removal of barriers to trade. This has mainly taken the form of restrictions created by national governments like quot

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