4. The following AGGREGATE OUTPUT / INCOME 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 CONSUMPTION 2,100 2,500 2,900 3,300 3,700 4,100 4,500 4,900 PLANNED INVESTMENT 300 300 300 300 300 300 300 300 a. At each level of output, calculate saving. At each level of out put, calculate unplanned investment (inventory change) What is likely to happen to aggregate output if the economy produces at each of the levels indicated? What is the equilib rium level of output? b. Over each range of income (2,000 to 2,500, 2,500 to 3,000, and so on), calculate the marginal propensity to consume. Calculate the marginal propensity to save. What is the multiplier? C. By assuming there is no change in the level of the MPC and the MPS and planned investment jumps by 200 and is sus tained at that higher level, recompute the table. What is the new equilibrium level of Y? Is this consistent with what you compute using the multiplier?

4. The following AGGREGATE OUTPUT / INCOME 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 CONSUMPTION 2,100 2,500 2,900 3,300 3,700 4,100 4,500 4,900 PLANNED INVESTMENT 300 300 300 300 300 300 300 300 a. At each level of output, calculate saving. At each level of out put, calculate unplanned investment (inventory change) What is likely to happen to aggregate output if the economy produces at each of the levels indicated? What is the equilib rium level of output? b. Over each range of income (2,000 to 2,500, 2,500 to 3,000, and so on), calculate the marginal propensity to consume. Calculate the marginal propensity to save. What is the multiplier? C. By assuming there is no change in the level of the MPC and the MPS and planned investment jumps by 200 and is sus tained at that higher level, recompute the table. What is the new equilibrium level of Y? Is this consistent with what you compute using the multiplier?

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter9: Aggregate Demand

Section: Chapter Questions

Problem 1.3P

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