If, in an economy, a $200 billion increase in consumption spending creates $200 billion of new income in the first round of the multiplier process and $160 billion in the second round, the marginal propensity to consume and the multiplier are, respectively, O 0.8 and 5.0. O0.4 and 2.5. O 0.4 and 1.67. O 0.2 and 1.25.
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- If Multiplier is 1/1-MPC and MPS+MPC=1, MPC= Marginal propensity to consume and MPS= marginal propensity to save. Using this formula and MPC is 0.9 multiplier is __________ and if MPS =0.4 multiplier is ________________ a 10 and 10 b 1 and 2.5 c 10 and 2.5 d 1.111 and 1.666Given Co = 400 and MPC=0.70 Find Consumption when Yd = 2000 and when Yd = 3000. Calculate Savings for both these levels of disposable income and consumption. Calculate MPS. Does MPS + MPC = 1? If autonomous consumption increases by $50. What is the multiplier? What is the change in total spending? Use a diagram to show which curve shifts and how.A consumer has $280 to spend on two commodities, the first of which costs $2 per unit and the second $5 per unit. Suppose that the utility derived by the consumer from x units of the first commodity and y units of the second is given byU(x,y)=100x0.25y0.75How many units of each commodity should the consumer buy to maximize utility? Compute the Lagrange multiplier λ and interpret in economic terms.
- Table 2 shows elements in the national income accounts of an economy. Assume the economy is currently in equilibrium. elements billions Consumption (total) 80 Investment 9 Government Expenditure. 6 Imports 15 Exports 8 C) If national income now rises by £22 billion and as a result, the consumption of domestically produced goods rises to £80 billion. Calculate the marginal propensity to consume (MPC). D) What is the value of the multiplier? E) Comment on the results in part (c) and (d).47)Which one is TRUE? Select one: a. The larger the MPC, the smaller the multiplier. b. The multiplier is the ratio of the change in autonomous expenditure to the change in real GDP c. The real world multiplier is larger than the textbook multiplier when we take into account the impact of changes in GDP on imports, inflation and the interest rate. d. The real world multiplier is smaller than the textbook multiplier when we take into account the impact of changes in GDP on imports, inflation and the interest rate.Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. Consumption and the multiplier: Show how to derive an IS curve that includes the consumption multiplier. That is show how to derive equation (11.16(below)). Draw a graph of the original IS curve and the IS curve that includes the multiplier. Which one is flatter and why? (11.16) Y~=[1/(1-x-bar)] x [a-bar - b-bar(Rt - r-bar)] ^multiplier ^original IS curve
- 6. Is the relationship between changes in spending and changes in real GDP in the multiplier effect a direct (positive) relationship or is it an inverse (negative) relationship? How does the size of the multiplier relate to the size of the MPC? The MPS? What is the logic of the multiplier-MPC relationship?If an increase in investment spending of $50 million results in a $400 million increase in equilibrium real GDP, then O A. the multiplier is 0.125. B. the multiplier is 3.5. C. the multiplier is 8. D. the multiplier is 50.Yd Consumption Expenditure $ 0 $ 6,000 $ 10,000 $ 14,000 $ 20,000 $ 22,000 $ 30,000 $ 30,000 $ 40,000 $ 38,000 $ 50,000 $ 46,000 Determine break even level of income Determine autonomous consumption If your income level were $30,000, how much would you save? Calculate MPC, MPS, and Multiplier How much equilibrium level of income will increase by if autonomous Investment of $4,000 was made?
- 1. What would happen to multiplier if investment were to be positively related to income? 2. is it possible for total saving to fall when people beome more thirfty? 3. What is meant by multiplier?Why shoul the value of multiplier rise when people spend more on consumption?a) Given Co = 400 and MPC = 0.70. Find Consumption when Yd = 2000 and when Yd = 3000. b) Given the consumption levels you found in part a), calculate Savings for both these levels of disposable income and consumption c) Calculate MPS d) Prove that MPS + MPC = 1 e) If autonomous consumption increases by $50. What is the multiplier? What is the change in total spending? f) Draw a diagram to show the effect of the multiplier in the economy? [Hint: What shifts and how?] Kindly answer this question correctly and type the answer here. Don’t give a handwritten answer on a page. And please answer it in 15 minutes. I will give you a thumbs up.a) Given Co = 400 and MPC = 0.70. Find Consumption when yd = 2000 and when Yd = 3000. b) Given the consumption levels you found in part a), calculate Savings for both these levels of disposable income and consumption c) Calculate MPS d) Prove that MPS + MPC = 1 e) If autonomous consumption increases by 50. What is the multiplier? What is the change in total spending? f) Draw a diagram to show the effect of the multiplier in the economy? [Hint: What shifts and how? ] Kindly answer this question correctly and type the answer here. Don't give a handwritten answers on a page. And please answer it in 15 minutes. I will give you a thumbs up.