Question

Imagine an economy where an additional injection of $10 billion in export sales results in national income increasing by $25 billion. There is a marginal propensity to save of 0.19 and a marginal propensity to tax of 0.18. What is the marginal propensity to import?

Imagine an economy where:

Autonomous expenditure is $40, equilibrium national income is $100, full employment output is $150, the marginal propensity to consume is 0.6, the size of the multiplier is 2.5

What is the size of the deflationary gap?

Imagine an economy with a marginal propensity to consume of 0.80.

Investment is $22, Government Spending is $4 and Exports are $14.

Full employment output is $100.

1. a)

Use the following formula to calculate the economy's current level of national income:

Planned withdrawals = Planned injections.

b)

Which of the following is correct?

(Use the answer to part a).

A. The actual level of output is less than full employment output, there is a deflationary gap

B. The actual level of output is less than full employment output, there is an inflationary gap

C. The actual level of output is more than full employment output, there is a deflationary gap

D. The actual level of output is more than full employment output, there is an inflationary gap

E. The actual level of output is equal to full employment output.

F. None of these answers are correct.

c)

What is the value of the multiplier?

Imagine an economy where the marginal propensity to import is 0.05, the marginal propensity to save is 0.01 and the marginal propensity to be taxed is 0.40.

Exports are $145, investment is $90 and government spending is $110.

The level of autonomous consumption is unknown.

Full employment output is $4,559.

What is the equilibrium output of this economy?

Answer 1