Question

1. Given the following data, solve the problem mathematically and draw a graph explaining your results:

1. Change in G = $550M
2. MPS = 15%
3. Change in GDP =?

2. Fill in the blanks in the following chart: (Taxes are constant at $5)

GR.I.	Taxes		DI	C	S	APC	APS	MPC	MPS
$230	$5				-$10
250					-5
270					0
290					5
310					10
330					15
350					20
370					25
390					30

Answer 1

Change in G= $550 M

MPS = 0.15

Change in GDP = (1/1-MPC)(Change in G)

= (1/MPS)($550 M)

= (1/0.15)(550) = $3666.67 M

GDP	Taxes	DI= GDP-T	C=DI-S	S	APC=C/DI	APS=S/DI= 1-APC	MPC= (Change in C/Change in DI)	MPS= 1-MPC
230	5	225	225-(-10)= 235	-10	1.04	-0.04	-	-
250	5	245	245-(-5)=250	-5	1.02	-0.02	0.75	0.25
270	5	265	265-0=265	0	1	0	0.75	0.25
290	5	285	285-5=280	5	0.98	0.02	0.75	0.25
310	5	305	305-10=295	10	0.97	0.03	0.75	0.25
330	5	325	325-15=310	15	0.95	0.05	0.75	0.25
350	5	345	345-20=325	20	0.94	0.06	0.75	0.25
370	5	365	365-25=340	25	0.93	0.07	0.75	0.25
390	5	385	385-30=355	30	0.92	0.08	0.75	0.25