Question

Income    (Yd)	Consumption Expenditure	Saving	Investment Expenditure	Government Expenditure	Net Export Expenditure	Aggregate Expenditure
$8000	$11,000		$2,500	$5,000	$12,500
12,000	14,000		2,500	5,000	12,500
20,000	20,000		2,500	5,000	12,500
30,000	27,500		2,500	5,000	12,500
50,000	42,500		2,500	5,000	12,500
100,000	80,000		2,500	5,000	12,500

Calculate savings, MPC, MPS, break even income, and the equilibrium level of income (Y = AE = C + I + G +NX) in the above given information.

Draw a graph showing disposable income (Yd) on the horizontal axis and aggregate expenditures (AE) on the vertical axis with a 45 degree line. Graph consumption curve (CC) and AE (AE = C + I + G + NX) curve on this graph. Indicate equilibrium level of income on this graph.

PLEASE AVOID HANDWRITING!

Answer 1

Yd	C	S	I	G	NX	AE
8000	11000	-3000	2500	5000	12500	31000
12000	14000	-2000	2500	5000	12500	34000
20000	20000	0	2500	5000	12500	40000
30000	27500	2500	2500	5000	12500	47500
50000	42500	7500	2500	5000	12500	62500
100000	80000	20000	2500	5000	12500	100000

C + S = Yd

MPC = Change in consumption/Change in Yd = (14000 - 11000)/(12000 - 8000) = 0.75

MPS = 1 - MPC = 0.25

Break even income = 100000 (where AE = Yd)