Question

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 = C + I + G + NX).

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 AE (AE = C + I + G + NX) curve on this graph. Indicate break even level of income (Y=C) and equilibrium level of income (AE=Yd).

Answer 1

Income (Yd) $	Consumption Expenditure C $	Savings (S) $	Investment Expenditure (I) $	Government Expenditure (G) $	Net export (NX) $	Aggregate expenditure (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

MPC = (14000-11000)/(12000-8000)

MPC = .75

MPS = 1-MPC = 1-.75

MPS = .25

Spending multiplier = 1/(1-MPC) = 1/(1-.75)

Spending multiplier= 4

Equilibrium income = Y = AE = $100000

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Yd = C = $20000

Equilibrium income = AE = $100000