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?

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The following questions refer to this table:

AGGREGATE
PLANNED
OUTPUT/INCOME
CONSUMPTION
INVESTMENT
2,000
2,100
300
2,500
2,500
300
3,000
2,900
300
3,500
3,300
300
4,000
4,500
3,700
300
4,100
300
5,000
4,500
300
5,500
4,900
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?
Transcribed Image Text:AGGREGATE PLANNED OUTPUT/INCOME CONSUMPTION INVESTMENT 2,000 2,100 300 2,500 2,500 300 3,000 2,900 300 3,500 3,300 300 4,000 4,500 3,700 300 4,100 300 5,000 4,500 300 5,500 4,900 300 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?
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