Nobody downloaded yet

The Reduction of Consumption Function in Economy - Term Paper Example

Comments (0) Cite this document
In this paper demonstrates the Canadian government’s effort to influence the price of the hogs in the market in order to support farmers. Also, the author describes how to explore the farm policy through microeconomic analysis with the use of supply and demand…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER91.7% of users find it useful
The Reduction of Consumption Function in Economy
Read TextPreview

Extract of sample "The Reduction of Consumption Function in Economy"

Download file to see previous pages The article entitled “A spent force” from the Economist dated October 16th, 2008 talks about the financial crisis and its effect on the spending of the whole US economy. According to the article, there are “ominous signs that the crisis will have a big impact on spending (2008, 1).” In order to assess the effects of the crisis on the spending of the US economy, we apply some macroeconomic tools for analysis.
The credit crunch in the economy, as a result of inappropriate lending, has been apparent up until now, even when the effects are expected to tone down after the government has given bailout efforts to rescue banks. While a function of the consumption side of the economy remains reliant on credit for purchases, this financial crisis definitely has some effects as apparent in our multiplier model.
Figure 2.1 shows a multiplier model, where the national output is a function of the consumption, investments, government spending, and net exports in an economy. When the credit crunch occurs, loans become less available or less affordable which curbs down people’s consumption through credit that is offered by banks and other financial institutions. The reduction in the consumption does not reduce the national output by the face value of the amount, but the amount multiplied by a multiplier.
The multiplier in the economy is determined by dividing 1 by the marginal propensity to consume (for every given dollar, how much goes to be spent) (Samuelson and Nordhaus 2004, 496). When the marginal propensity to consume is not present in our analysis due to insufficient data, we know for sure that the effect of this decrease in consumption due to less availability of credit has a multiplier effect to the economy.
Decreasing the consumption function is one, but there is another function that is affected by this financial crisis; the investment function of the economy is also affected. The availability of loans from banks has become tightened in such a way that either the cost of capital increases which makes loans more expensive or the requirements for loan applications have become more stringent. ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(The Reduction of Consumption Function in Economy Term Paper, n.d.)
The Reduction of Consumption Function in Economy Term Paper. Retrieved from
(The Reduction of Consumption Function in Economy Term Paper)
The Reduction of Consumption Function in Economy Term Paper.
“The Reduction of Consumption Function in Economy Term Paper”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF The Reduction of Consumption Function in Economy

Energy consumption and the US Economy

..., conservative commentators and Exxon Mobil, who argue against humans’ involvement in global warming (Dessler & Parson 2010). On the other hand, the support from environmental organizations and public figures has initiated programs of adaptation to changes in infrastructural needs and emissions reduction, which has been efficient so far in handling global warming in America. The public is informed about these policies through media campaigns and social forums where individuals are allowed to air their personal views towards pollution and global warming. QUESTION TWO The energy efficiency and the economy of vehicles fuel produce too many environmental emissions that interfere with the atmosphere....
8 Pages(2000 words)Essay

Function of Government in UAE Economy

...?Running Head: Function of Government in UAE Economy Function of Government in UAE Economy [Institute’s Function of Government in UAE Economy Introduction UAE has an open economy with high-income levels and ranks at 30th position worldwide in terms of Human Development Index. UAE’s economy ranks fifteenth in the list of economies arranged in terms of their purchasing power per capita and sixth in terms of GDP per capita. It was almost five decades ago when oil was first discovered in UAE. At that time, UAE was merely an impoverished and tribal region situated in the middle of deserts. Since then, UAE has witnessed great transformation into a modern state economy with high quality of life for its citizens (Mankiw, 2011, p. 651... investment,...
5 Pages(1250 words)Essay


...Lecturer’s Consumption Introduction Consumption refers to the process of using final goods to disposal. This essay will discuss in details, the reason as to why there is a difference in the way individuals consume. In the contemporary society, individuals live in different conditions meaning all of them are not in the same level. This therefore, gives a clear impression that the ways of consumerism differs from one individual to the next. There are various factors that influence the way in which an individual controls consumerism. In the whole world, every nation is different especially because of the administration. Every nation has a leader of its own who makes sure that all the citizens live as...
4 Pages(1000 words)Essay

Consumption Function

...Consumption Function Consumption function expresses the relationship between consumption and disposable income (income after tax). Symbolically, this functional relationship between consumption and disposable income is represented as C = f(Y), where C signifies consumption, Y depicts income, and f symbolizes the functional relationship between the two variables, consumption and income. In this consumption function, C is the dependent variable while Y is the independent variable, and their relationship is based on the 'ceteris paribus'...
4 Pages(1000 words)Essay

PC, MPC, consumption function nd th siz of multiplir

...PC, MPC, consumption function nd th siz of multiplir. Popl gt to mk dcisions bout splitting thir mony btwn consumption nd svings nd looks lik popl who hv nough mony usully sv som of it nd spnd most of it. Thr r two rtios Kynsin conomics should considr whn dling with consumption: th PC nd th MPC. Th mrginl propnsity to consum (MPC) rfrs to th incrs in prsonl consumr spnding (consumption) tht occurs with n incrs in disposbl incom (incom ftr txs nd trnsfrs). For xmpl, if houshold rns on xtr dollr of disposbl incom, nd th mrginl propnsity to consum is 0.65, thn of tht dollr, th fmily will spnd 65 cnts nd sv 35 cnts. Mthmticlly, th mrginl propnsity to...
5 Pages(1250 words)Essay


..."Which is more important, the consumer or the product Do consumers drive the development of products, or do products drive consumer behavior" In the age-old battle of consumer vs. product, consumer always wins. Without a consumer there is no product. Consumers are what shape everyday life without them the world couldn't thrive. Everything from child birth i.e. condoms and birth controls to world wars are based on consumers. The consumer is what makes the product, if a company came out with a brand of soda that tasted like fish it would be up to the consumer to decide whether that product survived or died. Let's assume that this company decided to test the product out on a hand full of people, if 75% of the people in this group... is more...
2 Pages(500 words)Essay

The Consumption Economy

...The Consumption Economy American Psycho is a cautionary tale that tugs at the heartstrings of American culture. The American economic model is so ‘successful’ that only select countries who have prospered through alternative models like Germany can dare raise a finger against it. To shield it even further against criticism, this book was published at a period of unprecedented economic growth. Why change a winning horse? Many would rightly question. American psycho makes a compelling case against such growth built on the back of massive consumption (Howell 45). Corporations seek to be in control of the consumer’s critical faculties using tasty commercials and illusory packaging. Their...
1 Pages(250 words)Essay

The Consumption Function

...The Consumption Function According to UN data, most countries have considered consumption expenditure as the most tangible element of the gross domestic product (GDP). In contrary, the vital components that explain the consumption expenditure are majorly wealth, disposable income , expected in future income the price level and the underlying interest rates. Country consumption expenditure real GDP (proxy for disposable income) in (US. million dollars) GDP deflator (proxy for price level) in (US. million dollars) lending interest rate in (US. million dollars) 1. Afghanistan 8,063,703,591 150 10.9 Na 2. Albania 8,414,732,177 124 3.5 13.1 3....
1 Pages(250 words)Research Paper


...not partake in the female part of society widely associated with shopping. As a result, the shopping culture of America slowly made women’s identities highly dependent on men’s support for appropriate function. Shopping is a practice that has surpassed its original demographic confines (Flanders 107). People do not have to move physically to shop anymore. The invention of direct post catalogs, ordering services available for twenty-four hours, and more importantly online shopping services allow people to shop anywhere and anytime. The variety of semiotic messages displayed on store windows in shopping centers required physical attention. This is not the case anymore as shoppers can go about consumption...
5 Pages(1250 words)Essay

Consumption Today vs. Consumption Tomorrow

...Teacher Consumption Today vs. Consumption Tomorrow In the film “A Knight’s Tale”, William asked the five florins share of his friends as a capital to embark on his project to compete in the tournament in Rouen. He convinced his friends to give up their share for the prospect of a better future that “In one month we could be on our way to glory and riches none of us ever dreamed of”. But for them to have the possibility of realizing that, they have to give up what the five florins could have bought which are “Eel pie. Brie tarts. Tansy cakes with peppermint cream.” Following the principle of PPC for analysis, it meant transferring their resources to purchase one good to another which in this case,...
1 Pages(250 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Term Paper on topic The Reduction of Consumption Function in Economy for FREE!

Contact Us