Assume autonomous consumption is Gh¢ 400 million, autonomous investment is Gh¢ 300 million and marginal propensity to consume is 75%.  Use income expenditure approach to calculate; I) the equilibrium national income Ii) the multiplier  III) assume further that autonomous investment changes to Gh¢ 700, find the new equilibrium national income

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Assume autonomous consumption is Gh¢ 400 million, autonomous investment is Gh¢ 300 million and marginal propensity to consume is 75%. 

Use income expenditure approach to calculate;

I) the equilibrium national income

Ii) the multiplier 

III) assume further that autonomous investment changes to Gh¢ 700, find the new equilibrium national income

Expert Solution
Step 1

i.)

Equilibrium national income:

Equilibrium national income can be calculated as follows:

Economics homework question answer, step 1, image 1

Thus, the national income is 2,800.

Step 2

ii.)

The multiplier can be calculated as follows:

Economics homework question answer, step 2, image 1

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