Macroeconomics (MindTap Course List)
Macroeconomics (MindTap Course List)
10th Edition
ISBN: 9781285859477
Author: William Boyes, Michael Melvin
Publisher: Cengage Learning
Question
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Chapter 9, Problem 6E
To determine

(a)

    YCIGX
    $ 500$500$10$20$60
    $600$590$10$20$40
    $700$680$10$20$20
    $800$770$10$20$0
    $900$860$10$20-$20
    $1000$950$10$20-$40

The value of MPC.

Expert Solution
Check Mark

Answer to Problem 6E

    YCMPC
    $500$500
    $600$5900.9
    $700$6800.9
    $800$7700.9
    $900$8600.9
    $1000$9500.9

Explanation of Solution

MPC = Change in consumptionChange in income

Wherein, Change in Income = Y1 - Y2

    YCMPC
    $500$500
    $600$5900.9
    $700$6800.9
    $800$7700.9
    $900$8600.9
    $1000$9500.9
Economics Concept Introduction

MPC − The additional consumption resulting from an additional unit of income.

To determine

(b)

To write:

    YCIGX
    $ 500$500$10$20$60
    $600$590$10$20$40
    $700$680$10$20$20
    $800$770$10$20$0
    $900$860$10$20-$20
    $1000$950$10$20-$40

The value of MPS.

Expert Solution
Check Mark

Answer to Problem 6E

The value of MPS is 0.10.

Explanation of Solution

Since income can only be either consumed or saved, therefore it can be written as

Y = C+S

Differentiating both sides with respect to Y

1 = MPC + MPS

Thus, MPS = 1 - MPC

In this case,

MPS = 10.9

MPS = 0.1

Economics Concept Introduction

MPS − The additional savings arising out of an additional unit of income.

To determine

(c)

    YCIGX
    $ 500$500$10$20$60
    $600$590$10$20$40
    $700$680$10$20$20
    $800$770$10$20$0
    $900$860$10$20-$20
    $1000$950$10$20-$40

The value of MPI.

Expert Solution
Check Mark

Answer to Problem 6E

    YI
    $ 500$10
    $600$10
    $700$10
    $800$10
    $900$10
    $1000$10

The MPI is zero.

Explanation of Solution

In this case, the investment is not changing with income level. It is fixed. Hence, the marginal propensity to invest is zero.

Economics Concept Introduction

MPI − The additional investment arising out of an additional unit of income.

To determine

(d)

    YCIGX
    $ 500$500$10$20$60
    $600$590$10$20$40
    $700$680$10$20$20
    $800$770$10$20$0
    $900$860$10$20-$20
    $1000$950$10$20-$40

The aggregate expenditure at each level of income.

Expert Solution
Check Mark

Answer to Problem 6E

    YCIGXAE
    $ 500$500$10$20$60$590
    $600$590$10$20$40$660
    $700$680$10$20$20$730
    $800$770$10$20$0$800
    $900$860$10$20-$20$870
    $1000$950$10$20-$40$940

Explanation of Solution

Aggregate expenditure at each level of income is consumption expenditure plus investment expenditure plus government expenditure and net exports.

Economics Concept Introduction

Aggregate expenditure− The expenditure made by different sectors of the economy to goods and services and the net exports.

To determine

(e)

    YCIGX
    $ 500$500$10$20$60
    $600$590$10$20$40
    $700$680$10$20$20
    $800$770$10$20$0
    $900$860$10$20-$20
    $1000$950$10$20-$40

The aggregate expenditure graphs.

Expert Solution
Check Mark

Answer to Problem 6E

Macroeconomics (MindTap Course List), Chapter 9, Problem 6E

Explanation of Solution

Aggregate Expenditure graph will be sloping upwards. This is due to the increase in level of aggregate expenditure.

    YCIGXAE
    $ 500$500$10$20$60$590
    $600$590$10$20$40$660
    $700$680$10$20$20$730
    $800$770$10$20$0$800
    $900$860$10$20-$20$870
    $1000$950$10$20-$40$940
Economics Concept Introduction

Aggregate expenditure− The expenditure made by different sectors of the economy to goods and services and the net exports.

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