QUESTION 2Consider the closed-economy market-clearing model. Assume that the marginal propensity to consume is 0.8. Tax revenue decreases by $5billion, while output and government spending remain the same(a) Calculate the dollar change in consumption.(b) Calculate the dollar change in national saving.(c) Does the equilibrium real interest rate increase, decrease, or stay the same?n toolhar nress ALT+F10 (PC) or ALT+FN+F10 (Mac).

Here, marginal propensity to consume is given as 0.8 and a decrease in tax revenue is given as $5…

Answered: QUESTION 2 Consider the closed-economy…

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter13: Capital, Interest, Entrepreneurship, And Corporate Finance

Section: Chapter Questions

Problem 1QFR

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1. Complete the accompanying table with disposable income (DI) and consumption (C) schedules for a private, closed economy. All figures are in billions of dollars. DI Consumption Saving АРС APS MPC MPS 8. 40 40 80 72 120 104 160 136 200 168 240 200 (a) Refer to the above data. If plotted on a graph, the slope of the consumption schedule would be: (b) The break-even level of income is ($ ) where saving equals ( $ :). Households dissave ( $ ). Dissaving occurs at the lowest levels of income as households spend ( more, less ) than they receive in disposable income. This dissaving could occur with households liquidating (selling for cash) their assets or borrowing money. As income rises we see that savings ( increases, decreases ) by a greater and greater amount. (c) If consumption increases by $10 billion at each level of disposable income, the average propensity to consume (APC) will ( change, unchange) and/but the marginal propensity to consume (MPC)will ( change, not change). (d) (APC,…
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