Problem
1. Calculate the consumption expenditure using the consumption function (as described by Equation 2) and the following estimates: Autonomous consumption: $1,450 billion Income: $14,000 billion Taxes: $3,000 billion Marginal propensity to consume: 0.8
2. Suppose that Dell Corporation has 20,000 computers in its warehouses on December 31, 2009, ready to be shipped to merchants (each computer is valued at $500). By December 31, 2010, Dell Corporation has 25,000 computers ready to be shipped, each valued at $450.
a) Calculate Dell's inventory on December 31, 2009.
b) Calculate Dell's inventory investment in 2010.
c) What happens to inventory spending during the early stages of an economic recession?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.