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- Value of Marginal Propensity to Consume lies between a. None O b. Negative one and Positive one O c. 0.5 and One С. d. Zero and One е. One and twoThe Average Propensity to Consume is: A. the percentage of disposable income that is consumed B. the percentage of disposable income that is saved C. the percentage of disposable income that is spent D. the percentage of disposable income that is investedQuestion Can this be explained in a simple way? Thanks The following table illustrates a few rounds of the multiplier process for a 2 sector economy for an initial increase in exogenous planned investment of 50. delta PAE 50 35 24.5 17.15 delta y 50 35 24.5 17.15 What is the approximate value of the multiplier in this economy? 1.4 2.4 3.0 3.3 0.7 The first round effect on GDP comes for the increase in exogenous investment, but the subsequent rounds depend on the amount of the additional GDP/national income that is spent. This depends on the marginal propensity to consume. In round 2 we have 35 = c times 50. So c =0.7 and the multiplier is l/(l-0.7) = 3.3333 or approximately 3.3.
- DI, C and S Given the following income, spending, and savings data, please answer the following questions: Savings (S) Disposable Income (DI) 0 $ $ 50000 $100000 $150000 d. Consumption (C) $ 40000 $ 70000 $100000 $130000 a. Solve for savings at each level of disposable income (DI) and place the values in the blanks above. b. Solve for the marginal propensity to consume (MPC) between each disposable income level. c. Although you were not asked to do so in this example, whenever solving for the APC, you should find that the APC decreases as the DI rises. Why would the APC decrease when the consumption values continue to increase as disposable income increases? State the value for the break level of income.Assume that a nation's marginal propensity to consume (MPC) is 0.75. A highiy productive, cost-cutting technology is developed for the production of commercial airplanes. The total industry expenditure in this nation is $100 million for the immediate acquisition and adoption of this technology. (a) For this nation, identify and explain how much this spending on new technology will change each of the following in the first round: i. Income (GDP) L. Saving i. Consumption (b) Assuming a closed economy and no leakages, identify and explain how much this spending on new technology will change each of the following at the end of the final round: i. Income (GDP) ii. Saving li. Consumption3 In the definition of marginal propensity to consume, marginal refers to ______.
- What is the equilibrium in this economy? Planned Change in Net Exports (NX) Aggregate Expenditures (AE) Government Real GDP (Y) Consumption (C) Investment (1')| Purchases (G) Inventories 1500 1100 250 1600 1175 100 1700 1250 1800 1900 2000 75 Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a 1500 b 1600 1700 d. 1800(1)The following macroeconomic model describes the economy of Sunderland. 1. Y= C +I + G + NX 2. C = 220 + 0.63 Y 3. 1 = 1000- 2000R 4. G = Go 5. NX = 525-0.10Y-50OR 6. M (0.1583Y-1000R)P (a)ls it a fair characterization to refer to equation #2 as a "simple" consumption function? Explain. (b)Derive the expression for equilibrium real output, Y, for this economy. Note: In your final expression for Y, restrict coefficient values to three decimal points. (c) Suppose government spending is 1200 , money supply by the Central Bank is 900 and the price level is 1, find the value of GDP (Y) and equilibrium interest rate (R) for Sunderland. Income Identity Consumption function Investment function Government Expenditure Net export function Money market equilibrium (2)The questions in this section are related to the macroeconomic model of Sunderland. (a)The expression you are asked to derive in question #1b can be considered an aggregate demand curve. Do you agree? Explain your answer. (b)Sketch…If the consumption is 410 and the investment are 530 find the aggregate demand in two sector economy
- What of the following summarises the the paradox thirft? a. if all people reduce their consumption, the additional saving makes higher investment possible. b. if all people try to increase their saving simultaneously then consumption, income and emplyment will fall but the volume of saving will remain unchanged. c. higher saving is required to achieve higher investment. d. the proprotion of national income saved decreases if the marginal propensity to consume decreases.Assuming there is no government or foreign sector, [1 / 1- MPC] represents a. the consumption function.b. the saving function.c. the multiplier.d. break even incomeClick on the icon to read the news clip, then complete the following steps. Business inventories fall when real GDP rises because 1800- 1600- Aggregate expenditure (billions of 2002 dollars) ○ A. inventories are falling from above target to their target levels 1400- B. firms put more production time into producing consumption goods and services OC. firms put more production time into producing exports 1200- OD. both B and C are correct 1000- The graph shows the aggregate planned expenditure curve. Draw a new AE curve to show the effect of an increase in exports and business investment. Label it AE₁. 8004 800 1000 1200 1400 45 degree line G AE 1600 1800 Draw a point at the new equilibrium expenditure. Draw an arrow along the new AE curve to show the effect of the increase in real GDP on consumption expenditure. Real GDP (billions of 2002 dollars) >>> Draw only the objects specified in the question. - News clip Business Inventories Decline, GDP Rises Real gross domestic product (GDP)…
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