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Is Consumption of Domestically Produced Goods just Consumption? watch

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    Hi,

    Slight terminology confusion here. I've been given a grid that says "Consumption = £60bn". The question wants me to find the mpcd (marginal propensity to consume domestically produced goods). I know the formula, but the question also says "Assume the consumption of domestically produced goods rose to £58bn". This is £2bn less than in the table. I assumed consumption and consumption of domestically produced goods were the same. Does this mean consumption of domestically produced goods is consumption minus imports? Because, the grid does give me figures for Imports.

    Thanks!
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    (Original post by Exceptional)
    Hi,

    Slight terminology confusion here. I've been given a grid that says "Consumption = £60bn". The question wants me to find the mpcd (marginal propensity to consume domestically produced goods). I know the formula, but the question also says "Assume the consumption of domestically produced goods rose to £58bn". This is £2bn less than in the table. I assumed consumption and consumption of domestically produced goods were the same. Does this mean consumption of domestically produced goods is consumption minus imports? Because, the grid does give me figures for Imports.

    Thanks!
    Consumption in the AD formula includes imports (that's why we minus off imports in the AD equation). So yeah, consumption of domestically produced products is consumption minus consumption on imports (imports, as a whole, can include import of capital goods or imports via government spending, so you likely wouldn't be able to calculate domestic consumption even if you did have the value of imports). Would you be able to link the question? It may just be a mistake / a badly worded questions, but it is hard to tell what they actually want based on the information you have given us.
 
 
 
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