1. Assume there are 2 states New York (NY) and Minnesota (MN). NY with a Marginal propensity to consume (MPC) of 90% and MN with a Marginal Propensity to save (MPS) of 30%. If both states have the same minimum level (or autonomous consumption) of 2,500. a) Demonstrate and explain the income expenditure model for Minnesota and New York on separate graphs with disposable income ranging from 0 to $10,000 in $2,000 increments. b) Compare the minimum income levels where savings begins for NY and MN c) How does the difference in MPC affect the economies for each state in the steady state? d) How is this relevant to the economic issue of today about wealth inequality, specifically, If two individuals have 2 different MPC? Demonstrate and explain Hint Formula from Module C= a MPC* Yd where Yd is disposable income.
1. Assume there are 2 states New York (NY) and Minnesota (MN). NY with a Marginal propensity to consume (MPC) of 90% and MN with a Marginal Propensity to save (MPS) of 30%. If both states have the same minimum level (or autonomous consumption) of 2,500. a) Demonstrate and explain the income expenditure model for Minnesota and New York on separate graphs with disposable income ranging from 0 to $10,000 in $2,000 increments. b) Compare the minimum income levels where savings begins for NY and MN c) How does the difference in MPC affect the economies for each state in the steady state? d) How is this relevant to the economic issue of today about wealth inequality, specifically, If two individuals have 2 different MPC? Demonstrate and explain Hint Formula from Module C= a MPC* Yd where Yd is disposable income.
Chapter11: Fiscal Policy
Section: Chapter Questions
Problem 1.4P
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