Use the table below to solve this problem. Level of Output and Income (GDP=DI) Consumption Saving APC APS MPC MPS $480 $512 $-32 1.0187 -0.0167 0.8 0.2 520 538 -16 1.0000 0.0000 0.8 0.2 560 560 0 0.9857 0.0143 0.8 0.2 600 584 16 0.9733 0.0267 0.8 0.2 640 808 32 0.9625 0.0375 0.8 0.2 680 632 48 0.9529 0.0471 0.8 0.2 720 656 84 0.9444 0.0556 0.8 0.2 760 680 80 0.9368 0.0632 0.8 0.2 800 704 96 0.9300 0.0700 0.8 0.2 Suppose the wealth effect is such that $10 changes in wealth produce $3 changes in consumption at each level of Income. Instructions: Enter your answers as a whole number. a. If real estate prices tumble such that wealth declines by $320, what will be the new level of consumption at the $680 billion level of disposable income? b. What will be the new level of saving?
Use the table below to solve this problem. Level of Output and Income (GDP=DI) Consumption Saving APC APS MPC MPS $480 $512 $-32 1.0187 -0.0167 0.8 0.2 520 538 -16 1.0000 0.0000 0.8 0.2 560 560 0 0.9857 0.0143 0.8 0.2 600 584 16 0.9733 0.0267 0.8 0.2 640 808 32 0.9625 0.0375 0.8 0.2 680 632 48 0.9529 0.0471 0.8 0.2 720 656 84 0.9444 0.0556 0.8 0.2 760 680 80 0.9368 0.0632 0.8 0.2 800 704 96 0.9300 0.0700 0.8 0.2 Suppose the wealth effect is such that $10 changes in wealth produce $3 changes in consumption at each level of Income. Instructions: Enter your answers as a whole number. a. If real estate prices tumble such that wealth declines by $320, what will be the new level of consumption at the $680 billion level of disposable income? b. What will be the new level of saving?
Chapter9: Aggregate Expenditures
Section: Chapter Questions
Problem 7E
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