Assume autonomous consumption is Gh¢ 400 million, autonomous investment is Gh¢ 300 million and marginal propensity to consume is 75%. Use income expenditure approach to calculate; I) the equilibrium national income Ii) the multiplier III) assume further that autonomous investment changes to Gh¢ 700, find the new equilibrium national income
Assume autonomous consumption is Gh¢ 400 million, autonomous investment is Gh¢ 300 million and marginal propensity to consume is 75%. Use income expenditure approach to calculate; I) the equilibrium national income Ii) the multiplier III) assume further that autonomous investment changes to Gh¢ 700, find the new equilibrium national income
Chapter19: The Keynesian Model In Action
Section: Chapter Questions
Problem 1SQP
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Assume autonomous consumption is Gh¢ 400 million, autonomous investment is Gh¢ 300 million and marginal propensity to consume is 75%.
Use income expenditure approach to calculate;
I) the equilibrium
Ii) the multiplier
III) assume further that autonomous investment changes to Gh¢ 700, find the new equilibrium national income
Expert Solution
Step 1
i.)
Equilibrium national income:
Equilibrium national income can be calculated as follows:
Thus, the national income is 2,800.
Step 2
ii.)
The multiplier can be calculated as follows:
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