Answered: Output/Income Consumption Savings MPC…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Output/Income	Consumption	Savings	MPC	MPS	APC	APS
0	80	0-80 = -80	-	-	-	-
100	140	100-140 = -40	0.6	0.4	1.4	-0.4
200	200	200-200=0	0.6	0.4	1	0
300	260	300-260=40	0.6	0.4	0.8666666667	0.1333333333
400	320	400-320=80	0.6	0.4	0.8	0.2

a. Assume Y= 400 Calculate the level of Consumption Hint: plug in 400 for Y into the Consumption and Savings equations, Also, calculate the following APC (C/Y); APS (S/Y)

b. Calculate the Multiplier 1/(1-MPC)

c. Assume Y= C + I + G + X I=20; G=30 X=0 Use the equation derived in (d) above; use this to Plug in the value of C into the equation.

I=Busines Investments

G= Government Spending

X=Net exports

Expert Solution

Step 1

Given data,

Output/Income	Consumption	Savings	MPC	MPS	APC	APS
0	80	0-80 = -80	-	-	-	-
100	140	100-140 = -40	0.6	0.4	1.4	-0.4
200	200	200-200=0	0.6	0.4	1	0
300	260	300-260=40	0.6	0.4	0.8666666667	0.1333333333
400	320	400-320=80	0.6	0.4	0.8

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