Initital $10 increase in investment expands GDP by $10 in first round of multiplier process. the 2nd round both GDP and Consumption rise $6. 1. what is the Marginal Propensity to Consume? 2. What is the size of the mulitplyer?
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Initital $10 increase in investment expands GDP by $10 in first round of multiplier process. the 2nd round both GDP and Consumption rise $6.
1. what is the Marginal Propensity to Consume?
2. What is the size of the mulitplyer?
Step by step
Solved in 3 steps
- In an economy investment increases by 120 crores. The value of multiplier is 4. Calculate the marginal propensity to consume.Income and Expenditure – End of Chapter Problem An economy has a marginal propensity to consume of 0.5, and Y*, the income-expenditure cquilibrium GDP, cquals $500 billion. Given an autonomous increase in planned investment of $10 billion, answer the following questions. a. What is the value of the multiplier? Value of the multiplier = b. What would you cxpect the total change in Y* to be bascd on the multiplicr formula? Change in Y* based on the multiplier = billion c. What is the total change in real GDP after the 10 rounds? It may be beneficial to make a table on a separate sheet of paper to calculate the change in real GDP for each of the rounds, and then add up the values. c. What is the total change in real GDP after the 10 rounds? It may be beneficial to make a table on a separate sheet of paper to calculate the change in real GDP for each of the rounds, and then add up the values. Total change in real GDP (10 rounds) = billion d. How do your answers to the change in GDP and Y…The multiplier is the ratio of the change in ________ to a change in ________. Select one: a. the level of saving; the level of consumption b. autonomous consumption; induced consumption c. the MPC; the MPS d. the equilibrium level of output; some autonomous variable
- What are the four categories of aggregate expenditure (demand)? Give an example of each. 9.1 Calculate the Marginal Propensity to Consume and the Marginal Propensity to Save. Fill in the blanks in the following table. Show that the MPC plus the MPS equals 1. National Income & Real GDP (Y) Consumption (C) Saving (S) MPC MPS $9,000 $8,000 $10,000 $8,600 $11,000 $9,200 $12,000 $9,800 $13,000 $10,400In an economy, planned aggregate expenditure is given by PAE = $500 billion + 0.6Y, where Y is equal to national income. a. What is the value of autonomous expenditure? billion b. What is the value of the marginal propensity to consume? c. What is the value of the expenditure multiplier? d. What is the value of equilibrium output? billionMultiplier Effect a. During a recessionary gap, is the goal to increase or decrease the equilibrium GDP? Will the change in spending be greater than, less than or equal to the change in the equilibrium GDP? b. c. In a given economy with an MPC of 0.8, the equilibrium GDP equals $630,000. If G increases by $70000, solve for the new equilibrium GDP that will result. In a given economy, with an equilibrium GDP of $280,000 both government purchases and taxes increase by $10,000. Solve for the new equilibrium GDP that will result from these two changes.
- QUESTION 21 What is the marginal propensity to consume? a. The ratio of the change in consumption to the change in national income O b. The proportion of national income that goes on consumption O c. The additional spending by a consumer when the price of a good falls O d. The additional revenue received by a firm when it attracts a new customerIn an economy investment increases by 120 million. The value of multiplier is 4. Calculate MPC.The table below provides Income and consumption Data in billions of dollars. Answer question below based on it.Disposable Consumption SavingsIncome100 80 --------200 150 --------- Using information from question 21, calculate the marginal propensity to consume for the economy? a. 0.8 b. 0.2 c. 0.3 d. 0.7
- 17. If the MPC were equal to zero, the expenditure multiplier would be * a. Less than zero b. zero c. between zero and one d. one e. greater than oneIn an economy investment in increased by $10 billion. As a result income rises by $50 billion. What is the value of multiplier?Y C I G X $ 100 $ 120 $ 20 $ 30 $ 10 $ 300 $ 300 $ 20 $ 30 - $ 10 $ 500 $ 480 $ 20 $ 30 - $ 30 $ 700 $ 660 $ 20 $ 30 - $ 50 a.What is the multiplier? b.What is the equilibrium level of the real GDP? c.What is the value of autonomous consumption?
