Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 23, Problem 4.3P
Subpart (a):
To determine
Aggregate saving, unplanned investment.
Subpart (b):
To determine
MPC, MPS and Multiplier.
Subpart (c):
To determine
Aggregate saving, unplanned investment.
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Suppose GDP in this country is $900 million. Enter the amount for consumption.
Value
National Income Account
(Millions of dollars)
Government Purchases (G)
250
Taxes minus Transfer Payments (T)
325
Consumption (C)
Investment (I)
275
Complete the following table by using national income accounting identities to calculate national saving. In your calculations, use data from the
preceding table.
National Saving (S)
2$
million
Complete the following table by using national income accounting identities to calculate private and public saving. In your calculations, use data from
the initial table.
Private Saving
million
Public Saving
2$
million
Based on your calculations, the government is running a budget
4.3 The following questions refer to this table:
Aggregate
Output/Income
Planned
Investment
Consumption
1,000
1,500
1,500
1,875
2,250
250
250
2,000
2,500
3,000
250
2,625
3,000
250
250
3,500
3,375
250
4,000
4,500
3,750
4,125
250
250
a. At each level of output, calculate saving. At each level
of output, calculate unplanned investment (inventory
change). What is likely to happen to aggregate output if
the
economy produces at each of the levels indicated?
What is the equilibrium level of output?
b. Over each range of income (1,000 to 1,500, 1,500 to 2,000,
and so on), calculate the marginal propensity to consume.
Calculate the marginal propensity to save. What is the
multiplier?
c. By assuming there is no change in the level of the MPC
and the MPS and planned investment jumps by 125 and is
sustained at that higher level, recompute the table. What
is the new equilibrium level of Y? Is this consistent with
what you compute using the multiplier?
AGGREGATE PLANNED OUTPUT/INCOME CONSUMPTION INVESTMENT 2,000 2,100 300 2,500 2,500 300 3,000 2,900 300 3,500 3,300 300 4,000 3,700 300 4,500 4,100 300 5,000 4,500 300 5,500 4,900 300a. At each level of output, calculate saving. At each level of out- put, calculate unplanned investment (inventory change). What is likely to happen to aggregate output if the economy produces at each of the levels indicated? What is the equilib- rium level of output?b. Over each range of income (2,000 to 2,500, 2,500 to 3,000, and so on), calculate the marginal propensity to consume. Calculate the marginal propensity to save. What is the multiplier?c. By assuming there is no change in the level of the MPC and the MPS and planned investment jumps by 200 and is sus- tained at that higher level, recompute the table. What is the new equilibrium level of Y? Is this consistent with what you compute using the multiplier?
Chapter 23 Solutions
Principles of Economics (12th Edition)
Knowledge Booster
Similar questions
- Analyze and interpret the following diagram in your own words Diagram Showing the Disposable Personal Income and Consumption $2,000 Consumption function E 1,500 AC= $400 1,000 C-AYd = $500 500 300 $500 1,000 1,500 2,000 Disposable personal income per period (billions of dollars) Consumption per period (billions of dollars)arrow_forwardSuppose GDP in this country is $480 million. National Income Account Value (Millions of dollars) Government Purchases (GG) 150 Taxes minus Transfer Payments (TT) 180 Consumption (CC) 225 Investment (II) 105 Complete the following table by using national income accounting identities to calculate private and public saving. In your calculations, use data from the initial table. Private SavingPrivate Saving = (YTI, TG, YCT) = = ?million Public SavingPublic Saving = = (CT, TG, YCT, YTI) = = $millionarrow_forwardThe table given below shows the disposable income and consumption of a household. In the table below, the level of saving at a disposable income of $1,200 is: Table 9.1 Disposable Income ($) Consumption (S) 1,000 800 1,100 880 1,200 960 1,300 1,040 1,400 1,120 a. $1,200 b. $950 c. $240 d. $80 e. $1,300arrow_forward
- 25 -100 -200 400 800 900 Aggregate income (in billions) Refer to Figure above Refer to the Figure above and find the following A. The equation for the aggregate consumption function is? B. Assuming society's MPs is constant, at an aggregate income level of $630, aggregate Saving would be? C. Assuming society's MPs is constant, at an aggregate income of $820 aggregate consumption would be? Aggregate saving (in billions)arrow_forwardSuppose GDP in this country is $1,540 million. Enter the amount for government purchases. National Income Account Value (Millions of dollars) Government Purchases (GG) Taxes minus Transfer Payments (TT) 455 Consumption (CC) 700 Investment (II) 490 Complete the following table by using national income accounting identities to calculate private and public saving. In your calculations, use data from the initial table. Private SavingPrivate Saving = = (t-g, y-t-i, c-t,y-c-t) = = million Public SavingPublic Saving = = (t-g, y-t-i, c-t, y-c-t) = = million Based on your calculations, the government is running a budget (surplus, deficit) .arrow_forwardAggregate Income, Aggregate Consumption, Aggregate Saving, The value of the MPC is (Round your response to one decimal place.) Y C S $0 $200 $-200 100 250 -150 200 300 -100 300 350 -50 400 400 0 500 450 50 600 500 100arrow_forward
- 21. Which of the following equations is correct? A Saving = Disposable income + Consumption B- Saving = Disposable income x Consumption C- Disposable income = Consumption - Saving D- Saving = Disposable income - Consumptionarrow_forward________ Is that type of investment which is not affected by change in the level of output or incomearrow_forwardAssume: Yd = $ 5000 billion b = .95 a = $ 520 billionA)What is consumption (C) ?B)What are savings (S) ? C)What is APC ?D)What is APS ?arrow_forward
- The gross domestic product (GDP) of Country A is $2 trillion in year 1. What value of investment will increase its GDP to $4.5trillion in year 2? (present your result in the nearest billion dollars, i.e., no decimal places) Assume that the average disposable income and consumption (in real $) of this country's citizen are provided in the table below. Year Income Consumption 1 60,000 50,000 64,726 51,259arrow_forwardSuppose GDP in this country is $1,680 million. Enter the amount for government purchases. Value National Income Account (Millions of dollars) Government Purchases (G) Taxes minus Transfer Payments (T) 360 Consumption (C) 1,000 Investment (I) 280 Complete the following table by using national income accounting identities to calculate national saving. In your calculations, use data from the preceding table. National Saving (S) = Complete the following table by using national income accounting identities to calculate private and public saving. In your calculations, use data from the initial table. Private Saving = million %3D Public Saving = million %3D Based on your calculations, the government is running a budgetarrow_forward1.12 Study the following diagram and answer the question that follows. Expenditures (billions of dollars per year) 3500 3000 2500 2000 1500 1000 500 Figure 9.1 45 500 1000 1500 2000 2500 3000 3500 Income (billions of dollars per year) At an income level of $2,000 billion, a) Consumption equals $1,500 billion. b) Saving equals $0. c) The MPC equals 0.80. d) There is dissaving.arrow_forward
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