Errors made by researchers using the long-term estimate of the marginal propensity to consume to predict short-term movement in consumption can be extremely large. It is important, therefore, to understand when those errors might occur. If you were to draw the simple Keynesian consumption with MPC = 0.94 on a piece of graph paper, then you would expect to plot
A) the combination of consumption and GDP for 1973 above the line.
B) the combination of consumption for 1983 below the line.
C) the combination of consumption and GDP for 1975 above the line.
D) the combination of consumption and GDP for 1946 below the line.
E) none of the above.

Question

Quizplus · Accepted Answer

The question is theoretical and does not provide specific data or context for the years mentioned (1973, 1983, 1975, 1946), making it impossible to accurately predict the position of consumption relative to GDP for those years without additional information. The marginal propensity to consume (MPC) value alone is not sufficient to determine the exact positioning of consumption and GDP for specific years on a graph.

Errors Made by Researchers Using the Long-Term Estimate of the Marginal