Answered: The following table shows consumption…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

The following table shows consumption (C), investment spending (I), and government purchases (G), for some hypothetical economy at several levels of income (reported in billions of dollars of real GDP). Assume that in this economy, income is taxed at a rate of 25%, base consumption is $25 billion, and that the marginal propensity to consume (MPC) is 0.333, or 1/3.

Further assume that this economy is closed, that is, there is no international trade and so net exports are always equal to zero.

Use the given information to fill in disposable income, consumption, and planned expenditures in the following table.

Income: Real GDP	Disposable (After Tax) Income	C	Ip	G	Planned Expenditures
(Billions of dollars)	(Billions of dollars)	(Billions of dollars)	(Billions of dollars)	(Billions of dollars)	(Billions of dollars)
0	0	25	150	50
100			150	50
200			150	50
300			150	50
400			150	50
500			150	50

The following graph shows income (real GDP) on the horizontal axis and planned expenditure on the vertical axis.

Use the black line (plus symbol) to plot a 45-degree line on this graph. Then use all 6 of the the blue points (circle symbols) to plot the planned expenditure line for this economy. Be sure to plot these points at the income levels listed in the table (0, 100, 200, 300, 400, and 500 billion dollars).

On the previous graph, use the black point (plus symbol) to indicate the equilibrium income.

Note: Dashed drop lines will automatically extend to both axes.

Suppose income is currently $100 billion. This would mean that , which would send a signal to firms to .

The following table shows consumption (C), investment spending (I), and government purchases (G), for some hypothetical economy at several
levels of income (reported in billions of dollars of real GDP). Assume that in this economy, income is taxed at a rate of 25%, base consumption is $25
billion, and that the marginal propensity to consume (MPC) is 0.333, or 1/3.
Further assume that this economy is closed, that is, there is no international trade and so net exports are always equal to zero.
Use the given information to fill in disposable income, consumption, and planned expenditures in the following table.
Income: Real
GDP
(Billions of
dollars)
0
100
200
300
400
500
Disposable (After Tax)
Income
(Billions of dollars)
0
с
(Billions of
dollars)
25
Ip
(Billions of
dollars)
150
150
150
150
150
150
G
(Billions of
dollars)
엉엉엉엉엉엉
50
50
50
50
50
50
The following graph shows income (real GDP) on the horizontal axis and planned expenditure on the vertical axis.
Planned
Expenditures
(Billions of dollars)

Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.
PLANNED EXPENDITURES (Billions of dollars)
600
500
400
300
200
100
0
0
100
200
300
400
INCOME (Billions of dollars)
500
600
45-Degree Line
Note: Dashed drop lines will automatically extend to both axes.
PE Line
++
Equilibrium Income
On the previous graph, use the black point (plus symbol) to indicate the equilibrium income.
?

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions