Question

C. Refer to table given below.

1. Fill-in the missing items in the table.

2. Identify the break-even level of income.

Income consumption Saving APC

$ 240 ________ $ -4 $ ______

260 ________ 0 ______

280 ________ 4 ______

300 ________ 8 ______

320 ________ 12 ______

340 ________ 16 ______

3. Compute the multiplier (M0 if:

a). MPC =0.25, b). MPC=0.75 and c). MPC=0.9

2. Based on the results form question # 1.above, explain how
multiplier

(M) is related to MPC.

B. Answer the following questions on the basis of the
consumption expenditure

function given below.

C = 200 + 0.8Yd

1. Compute the value of C when Yd is $9000.

2. What are the values of:

a). MPC.

b). MPS.

3. Compute the multiplier for this function

Answer #1

**2)** Income = Consumption + Saving

APC = Consumption / Income

Income |
Consumption |
Saving |
APC |

240 | 244 | -4 | 1.02 |

260 | 260 | 0 | 1.00 |

280 | 276 | 4 | 0.99 |

300 | 292 | 8 | 0.97 |

320 | 308 | 12 | 0.96 |

340 | 324 | 16 | 0.95 |

Break even occurs when consumption = income which occur when income is 260.

**3)** Multiplier = [1 / (1 - MPC)]

If MPC = 0.25, Multiplier = [1 / (1 - 0.25)] = 1.33

If MPC = 0.75, Multiplier = [1 / (1 - 0.75)] = 4

If MPC = 0.9, Multiplier = [1 / (1 - 0.9)] = 10

Based on the above analysis, we can say that MPC and multiplier have positive relationship with each other.

**B)** C = 200 + 0.8Yd

**1)** When Yd = 9,000

C = 200 + 0.8 * 9,000 = 7,400

**2)**

**a)** MPC = 0.8

**b)** As MPC + MPS = 1, MPS must be 0.2

**3)** Multiplier = [1 / (1 - MPC)] = [1 / (1 -
0.8)] = 5

Short essay questions.
1. Describe the four phases of a complete business cycle. Use
graph to show the sequence of the four phases of a business
cycle.
2. Identify the economic and non-economic/social costs of
unemployment.
3. Based on their income, list three groups of people in the
society who are hurt more from unanticipated/unexpected inflation
than others.
4. Discuss how investment expenditure is affected by changes
in interest rate. Indicate their relationship.
II. Problem Solving Questions. Show your computations...

Using the information given and the equation C = $200B + b(YD),
please answer the following questions.
Calculate the value of Consumption (C) using the equation C =
$200B + b(YD) (3 points)
What is the value of MPC? (2 points)
What is the value of MPS? (2 points)
What is the value of multiplier M? (2 points)
What happens to the value of multiplier M when MPC increases?
(2 points)
What happens to the value of multiplier M when...

1.Which of the following is a true statement about the
multiplier? *
The multiplier effect does not occur when autonomous
expenditures decrease
The multiplier is a value between zero and one
The smaller the MPC, the larger the multiplier
The multiplier rises as the MPC rises
2.According to the Keynesian model of the macroeconomic, the
most effective means for closing a recessionary gap is *
Decrease in marginal tax rates which shift SRAS
Increases in government spending which shift AD...

Given the information below, complete the chart and answer the
questions that follow. Assume there are no taxes, so Y = Yd. Also,
assume that I, G and (X-M) are autonomous expenditures.
S
Y
C
I
G
(X-M)
TE
0
5,000
2,500
2,000
500
10,000
12,500
20,000
30,000
40,000
50,000
What is the MPC?
What is the MPS?
What is the specific consumption function for this
economy?
What is equilibrium income?

This assignment is due by Monday, October 12 by
11:59pm.
Income
(Yd)
Consumption
Expenditure
(C)
Saving
(S)
Investment
Expenditure
(I)
Government
Expenditure
(G)
Net Export
Expenditure
(NX)
Aggregate
Expenditure
(AE)
$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
From the above given information calculate savings, MPC, MPS,
Multiplier, and the equilibrium level of income (Y = AE...

1.Suppose that for a particular economy and period, investment
was equal to RM 200 billion, government expenditure was equals to
100, net taxes[TA] were fixed at 150 and consumption was
represented by below function C= 20+0.6YD
a. What is the level of equilibrium income?
b. What is the value of government expenditure multiplier?
c. What is the value of the tax multiplier?
d. If investment decline by RM100 billion, what will be the new
equilibrium
2.Assume investment = 100, government...

Disposable
Income
Yd
Consumption
C
$2,000
$2,040
2,100
2,120
2,200
2,200
2,300
2,280
2,400
2,360
Using the table provided calculate the following for each level
of disposable income:
Change in disposable income
Change in consumption
Saving
Change in saving
MPC
MPS
The multiplier
Show your work if possible. I suggest that you build a
table containing the information requested. This question is worth
7 points. All other questions are worth one point
each.
2. The classical economists believed __________ determined...

1. The consumption function, investment function, government
function, and net export functions are given as follows:
C = 100 + 0.8Yd , I = 200, G = 350, X = 500, IM = 100
+ 0.2Y, T = 10 + 0.05Y
At what levels of national income will government budget be
balanced?
At what levels of national income will trade be balanced?
What is the equation of the aggregate expenditure curve?
Calculate the equilibrium level of national income.
Calculate the...

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

C = 80 + 0.6Yd
1. Draw the consumption function
2. What is the value of consumption spending when the disposable
income equals zero?
3. What is the value of MPC?
4. What is the value of MPS?
5. What is the value of consumption spending when the disposable
income equals to 400?
6. What is the value savings when disposable income equals to
400?
7. Write the saving function
8. Draw the saving function

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