Consider two economies (1 and 2) where in equilibrium, the level of aggregate income (Y) is the sum of aggregate investment expenditure (I) and aggregate consumption expenditure (C). I is determined autonomously of Y and its value in economy 1 is double that in economy 2. If the marginal propensity to save in economy 1 is half that in economy 2 for all values of Y, then the equilibrium value of Y – C in economy 1 is A. double that in economy 2 B. half that in economy 2 C. the same as that in economy 2 D. None of the above

Consider two economies (1 and 2) where in equilibrium, the level of aggregate income (Y) is the sum of aggregate investment expenditure (I) and aggregate consumption expenditure (C). I is determined autonomously of Y and its value in economy 1 is double that in economy 2. If the marginal propensity to save in economy 1 is half that in economy 2 for all values of Y, then the equilibrium value of Y – C in economy 1 is A. double that in economy 2 B. half that in economy 2 C. the same as that in economy 2 D. None of the above

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter18: The Keynesian Model

Section: Chapter Questions

Problem 9SQP

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ADVANCED ANALYSIS Assume that the consumption schedule for a private closed economy is such that consumption is: C = 100 + 0.75Y Assume further that planned investment Ig is independent of the level of real GDP and constant at Ig = 50. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig Instructions: Enter your answers as whole numbers.a. Calculate the equilibrium level of income or real GDP for this economy. Equilibrium GDP (Y) = $ . b. What happens to equilibrium GDP if Ig changes to 60? Equilibrium GDP (Y) = $ . What does this outcome reveal about the size of the spending multiplier? Spending multiplier = .
2. Suppose that consumption equals $500 billion when the disposable income is $0 and that each increase of $100 billion in disposable income causes consumption to increase by $70 billion. a. Draw a graph of the consumption function using this information. The axes must be labeled correctly, and the consumption function should have at least two points on the graph (correct coordinates). b. What is the Marginal Propensity to Consume in this economy? How did you arrive at your answer? Please show your work. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
1. Show that equilibruim level of income is at a point where consumption plus investment schedules intersect the 45 degree line. 2. Suppose the level of autonomous investment in an economy is K200,000 and the consumption function is given below as c = 80+0.8Y, what will be the equilibrium level of income. 4.if MPcC is 0.8, what will be the increase in the level of income if investment is increased to K400,000. 5. What increase in investment is needed to raise the income by K4000, if MPC is 0.75? How much will be the increase in consumption and saving due to this increase in income. 3. Given the consumption level C= 50 + 75Y, if we assume autonomous investment is K200,000 at what level of income will savings become equal to investment?
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39 - Which consumption is dependent on income?A) Marginal ConsumptionB) Nominal ConsumptionC) Real ConsumptionD) Autonomous ConsumptionE) Stimulated Consumption
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