International Economics

Order Description Question No. 1 The consumption function may be represented in the following relationship: C=a+b (Disposable Income) Where C: consumption spending a: autonomous consumption spending b: MPC On the graft below, draw the consumption function: C=$20+0.9 (Disposable Income). Consumption is $billions per year. Disposable income is $100 billion per year. Answer the following questions: At what level of income do households begin to save? Indicate the point on the graph with the letter A. By how much does consumption increase when income rises $150 beyond point A? Indicate this new level of consumption with point B. Question No. 2 Defined as the natural rise and fall of a country’s economic growth over time, the business cycle is considered a useful means for analyzing an economy. In the light of the above statement: explain the different phases of a business cycle explain how both inflation and unemployment contribute to the fluctuation of the business cycle.