Suppose that the marginal propensity to consume is 0.8, and investment spendingincreases by $100 billion. The increase in aggregate demand is:a)b)$125 billion, composed of $100 billion in investment spending and $25billion in consumption.$500 billion, composed of $100 billion in investment spending and $400billion in consumption.c) $100 billion, the amount of investment spending.d)$80 billion, composed of $100 billion in investment spending and a decreasein consumption of $20 billion.

The marginal propensity to consume (MPC) is the fraction of additional income that a consumer spends…

Answered: Suppose that the marginal propensity to…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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37. If the equilibrium level of GDP is $30,000, using the equations for C, I, G, and NX shown above, find the value of the marginal propensity to consume. C=4,000+ 0.5Y I= 1,500 G=2,250 NX=-150
3. When the following event occurs, the change in Real GDP = Event: The government increases its education funding by $60 billion; the marginal propensity to consume is 0.6. the multiplier.
If the Marginal Propensity to Consume is 0.9, this means that For each $1 increase in income, residents will increase their consumption by 10 cents. For each $2 increase in government purchase, spending in the economy will increase by $9.00. For each $2 increase in income, residents will increase their savings by 90 cents. For each $2 increase in taxes, spending in the economy will decrease by $18.00. For each $2 increase in government purchase, spending in the economy will increase by $16.00.
Explain the effects of the following actions on equilibrium income, assuming that the marginal propensity to consume is 0.8 A. Government purchases rise by $40 billion B. Taxes fall by $40 billion.
A company is growing rapidly, and is investing nearly all of its income, so its marginal propensity to consume (MPC) is 0.85. Remembering that MPC + MPS equals 1, we find out that the MPS is 0.15. What is the spending multiplier in this case?
Assume that marginal propensity to consume (MPC) is 73% and the full employment output (Real GDP) is $500 million. If the current actual Real GDP is at $300 million,. government spending by would bring the economy to full employment Real GDP output. a) increasing; $740,000,000 b) increasing: $135, 135, 135.1, c) decreasing; $ 54,054,054.05 d) increasing: $54,054,054.05
An economy has no imports and no income taxes. An increase in autonomous expenditure of $5 trillion increases equilibrium expenditure by $50 trillion. Calculate the multiplier and the marginal propensity to consume. What happens to the multiplier if an income tax is introduced? >>> Answer to 2 decimal places. The multiplier is
calculate the expenditure multiplier, if the marginal propensity to consume = .80, the tax rate = .25 and the marginal propensity to import = .1

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