The following table depicts a hypothetical economy in which the marginal propensity to save is constant at all levels of real GDP, investment spending is autonomous, and there is no government. Real GDP Consumption Saving Investment $0 $500 $-500 2,000 2,000 0 4,000 500 6,000 1,000 8,000 1,500 10,000 2,000 3,500 5,000 6,500 8,000 $1,500 1,500 1,500 1,500 1,500 1,500 This economy's marginal propensity to save is 0.25 and its marginal propensity to consume is 0.75. 1.) Using the line drawing tool, draw the consumption function Use the values of $0, and $10,000 for Real GDP to locate the endpoints of this line and label it 'C'. 2.) Using the line drawing tool, add the investment function to obtain C + 1. Properly label this line. Carefully follow the instructions above, and only draw the required objects. Planned Real C and I ($ thousands) 12- 11- 10 (0,1) 9- 8- 7- 6 5- 4- 3 2 04. 0 1 2 3 4 456 6 7 8 9 10 11 12 Real GDP per Year ($ thousands) Q Q G

The following table depicts a hypothetical economy in which the marginal propensity to save is constant at all levels of real GDP, investment spending is autonomous, and there is no government. Real GDP Consumption Saving Investment $0 $500 $-500 2,000 2,000 0 4,000 500 6,000 1,000 8,000 1,500 10,000 2,000 3,500 5,000 6,500 8,000 $1,500 1,500 1,500 1,500 1,500 1,500 This economy's marginal propensity to save is 0.25 and its marginal propensity to consume is 0.75. 1.) Using the line drawing tool, draw the consumption function Use the values of $0, and $10,000 for Real GDP to locate the endpoints of this line and label it 'C'. 2.) Using the line drawing tool, add the investment function to obtain C + 1. Properly label this line. Carefully follow the instructions above, and only draw the required objects. Planned Real C and I ($ thousands) 12- 11- 10 (0,1) 9- 8- 7- 6 5- 4- 3 2 04. 0 1 2 3 4 456 6 7 8 9 10 11 12 Real GDP per Year ($ thousands) Q Q G

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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