What is the value of the marginal propensity to consume (MPC) in this model? (2) What is the value of the multiplier in this economy? (3) Calculate aggregate spending in this economy (2) Calculate the equilibrium level of output. (3) Suppose the level of output that creates full employment (Yf) in the economy is 1 800. Determine the level of investment spending that would create full employment in this economy. (4)
What is the value of the marginal propensity to consume (MPC) in this model? (2) What is the value of the multiplier in this economy? (3) Calculate aggregate spending in this economy (2) Calculate the equilibrium level of output. (3) Suppose the level of output that creates full employment (Yf) in the economy is 1 800. Determine the level of investment spending that would create full employment in this economy. (4)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Question 1
(14 marks)
Consider the following numerical example of the simple Keynesian model with no government spending, taxes or a foreign sector (all figures in R millions):
C = 100 + 0,9Y
I = 50
Answer the following questions.
- What is the value of the marginal propensity to consume (MPC) in this model? (2)
- What is the value of the multiplier in this economy? (3)
- Calculate aggregate spending in this economy (2)
- Calculate the equilibrium level of output. (3)
- Suppose the level of output that creates full employment (Yf) in the economy is 1 800. Determine the level of investment spending that would create full employment in this economy. (4)
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