Answer to Question #249226 in Macroeconomics for Bib

Question

5. Estimate your income, consumption, and saving for last year. If you dissaved (consumed more than your income), how did you fi nance your dissaving? Estimate
the composition of your consumption in terms of each of the major categories listed in Table 21-1.

Answer 1

Solution:

People's earnings are either consumed or saved, though the majority of it is consumed rather than saved. As income rises, so do consumption and savings, though an increase in income is greater than an increase in consumption.

Dissaving is defined as spending more than one's available income. You can fund your dissaving by using previous savings, taking cash or credit advances, or borrowing.

Income = Consumption + savings

Since you are dissaving, income will be equal to zero and savings negative.

 

My income, consumption and savings estimation for last year is as follows:

Income = $20,000

Consumption = $25,550

Saving = ($5,550)

 

The composition of consumption estimate in terms of each of the major categories listed in Table 21.1 is as per the below table: