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Zahra Hicks Econ 202 28 July 2019
Macro Homework 3
Due Sunday
Course Objectives: 5a, 5b, 5c, 5d
Meaning of Homework: The graph this week is perhaps the most important macroeconomic
graph in history. John Meynard Keynes used this graph in the White House to try to explain the
Great Depression to President Roosevelt. More important than the graph is to understand the
message that it sends about the cause (and solution) to recessions. The key change in GDP
formula goes along with this understanding. In addition, we will look at some of the important
factors that influence consumer spending, investment spending, and international trade.
Note on submitting graphs in the homework: Most students draw a graph on paper, take a picture
of the graph, and then upload it (to a computer, in to a word document, directly in to the
homework submission, etc.) The library can help you with this process if you are unfamiliar
with uploading written work. You can also scan the documents. A few students usually draw a
graph right on the computer using some kind of graphing software, but that is not necessary.
For Questions 5-7, use the simple multiplier formula:
Change in Y = (1/(1-MPC)) x Initial Change in Spending
1. What is the main variable that influences consumer spending? If income rises by $100
