Assume a closed economy in which disposable income starts at 1,000 and increases by 500; consumption starts at 1,100 and increases by 300; investment spending is 1,000 and government spending is 500. 1. The marginal propensity to consume (MPC) is equal to:     0.5     0.6     0.7     6 2. The multiplier is:     0.25     2     2.5     3 3.The consumption equation is:     C = 500 + 0.6DI     C = 500 + 0.5DI     C = 100 + 0.75DI     C = 100 + 0.6DI

ENGR.ECONOMIC ANALYSIS
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Assume a closed economy in which disposable income starts at 1,000 and increases by 500; consumption starts at 1,100 and increases by 300; investment spending is 1,000 and government spending is 500.

1. The marginal propensity to consume (MPC) is equal to:

   

0.5

   

0.6

   

0.7

   

6

2. The multiplier is:

   

0.25

   

2

   

2.5

   

3

3.The consumption equation is:

   

C = 500 + 0.6DI

   

C = 500 + 0.5DI

   

C = 100 + 0.75DI

   

C = 100 + 0.6DI

4. Let ∆I = 1,000. What is the new equilibrium GDP"

   

7,000

   

7,500

   

2,000

   

8,500

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