Saturday

January 31, 2015

January 31, 2015

Posted by **animal** on Monday, May 12, 2008 at 1:29am.

Consider the following table. For this hypothetical economy, the marginal propensity to save is constant at all levels of real GDP, and investment spending is autonomous. There is no government.

Real

GDP----Consumption-------Saving-------Investment

($)-------($)-------------($)-----------($)

2,000----2,200-----------------------------

4,000----4,000-----------------------------

6,000----------------------------------------------------------

8,000----------------------------------------------------------

10,000----------------------------------------------------------

12,000----------------------------------------------------------

You need to:

1. Complete the table.

2. Calculate the marginal propensity to save.

3. Calculate the marginal propensity to consume.

4. Draw a graph of the consumption function using the Grapher. Then, add the investment function to obtain C+I.

5. Draw another graph showing the saving and investment curves under the C+I graph. What is the level of real GDP?

6. Calculate the numerical value of the multiplier.

7. Calculate the equilibrium real GDP without investment. What is the multiplier effect from the inclusion of investment?

8. Calculate the average propensity to consume at equilibrium real GDP.

9. If equilibrium real GDP is $8,000 when investment is $400, explain what happens to equilibrium real GDP if autonomous investment declines to $200.

(2) Calculating Average Propensity to Save and Average Propensity to Consume

A nation's consumption function (expressed in millions of inflation-adjusted dollars) is

C=$800 +0.80Y. There are no taxes in this nation.

Now answer the following questions:

1. What is the value of autonomous saving?

2. What is the value of the multiplier?

- Macro Help -
**economyst**, Monday, May 12, 2008 at 9:07amTake a shot. what do you think.

Hint, S=I, where I is composed of intended or autonomous investment Ia and unintended investment Ib (e.g., change in inventories). Hint 2. Multiplier is 1/MPS

- Macro Help -
**john**, Sunday, March 1, 2009 at 12:12pmI dont know missing something

**Answer this Question**

**Related Questions**

Macroeconomics - Suppose the marginal propensity to consume is 0.75. What does ...

Econ - Need help on this question, I tried the ones i know. a The consumption ...

macroeconomice - Will marginal propensity to spend (d) will be low if, ...

Economics(Please respond) - Given the increase in government expenditures and ...

Math - Suppose C(x) measures an economy's personal consumption expenditure and ...

math - Suppose C(x) measures an economy's personal consumption expenditure and x...

macroeconomice - Will marginal propensity to spend (d) will be low if, ...

math - Suppose a certain economy's consumption function is as follows, where C(x...

math - Suppose a certain economy's consumption function is as follows, where C(x...

macroecon - the greatest expansionary impact of a budget deficit will occur when...