4.3 The following questions refer to this table: Aggregate Output/Income Consumption Planned Investment 1,000 1,500 1,500 1,875 250 250 2,000 2,250 250 2,500 3,000 2,625 3,000 250 250 3,500 3,375 250 4,000 4,500 3,750 4,125 250 250 a. At each level of output, calculate saving. At each level of output, 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 equilibrium level of output? b. Over each range of income (1,000 to 1,500, 1,500 to 2,000, 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 125 and is sustained 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?

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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4.3 The following questions refer to this table:
Aggregate
Output/Income
Planned
Investment
Consumption
1,000
1,500
1,500
1,875
2,250
250
250
2,000
2,500
3,000
250
2,625
3,000
250
250
3,500
3,375
250
4,000
4,500
3,750
4,125
250
250
a. At each level of output, calculate saving. At each level
of output, 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 equilibrium level of output?
b. Over each range of income (1,000 to 1,500, 1,500 to 2,000,
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 125 and is
sustained 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?
Transcribed Image Text:4.3 The following questions refer to this table: Aggregate Output/Income Planned Investment Consumption 1,000 1,500 1,500 1,875 2,250 250 250 2,000 2,500 3,000 250 2,625 3,000 250 250 3,500 3,375 250 4,000 4,500 3,750 4,125 250 250 a. At each level of output, calculate saving. At each level of output, 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 equilibrium level of output? b. Over each range of income (1,000 to 1,500, 1,500 to 2,000, 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 125 and is sustained 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?
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