Question
ECO250 Unit 11 In-Class Exercise In macroeconomics, the marginal propensity to consume (MPC) is the proportion of extra income that is spent on consumption,
ECO250 Unit 11 In-Class Exercise In macroeconomics, the marginal propensity to consume (MPC) is the proportion of extra income that is spent on consumption, and it is important for determining the effects of monetary and fiscal policy. In this exercise, you will estimate the MPC with the slope from regression analysis. 1. Your two variables are consumption and income. Which is the dependent variable and which is the independent variable? 2. You have the following data on consumption and income (in $10,000s Income Consumption 7 9 11 5 7 2 87 Make a scatterplot and draw the line of best fit. 22 86 9 12 9 3. Do consumption and income appear to have a high, moderate, or low correlation? 4. Now you will estimate the slope and intercept. Fill in the table to start. Income (x) Cons (y) (x-x) (y-5) (x-x) (y) (x-x) 11 9258222 12 7 727289 13005 -4 11.14 10661 13201 24 36 9 9
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