Question

# Income    (Yd) Consumption Expenditure Saving Investment Expenditure Government Expenditure Net Export Expenditure Aggregate Expenditure \$8000...

 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.

 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)