question archive The marginal propensity to spend in this economy Consider an economy characterized by the following equations: C = 500 + 075Y + 005W I = 150 where C is desired consumption, I is desired investment, W is household wealth, and Y is national income a) Suppose W=10,000 Draw the aggerate expenditure function on a scale diagram along the 45 degree line What is the equilibrium level of national income? b) The marginal propensity to spend in this economy is 075 What is the value of the multiplier? c) Using your answer from part (b), what would be the change in equilibrium national income if desired investment increased to 250? Can you show this in your diagram? d) Now suppose household wealth increased from 10000 to 15000 What happens to the AE function and by how much does this national income change?
The marginal propensity to spend in this economy Consider an economy characterized by the following equations: C = 500 + 075Y + 005W I = 150 where C is desired consumption, I is desired investment, W is household wealth, and Y is national income a) Suppose W=10,000 Draw the aggerate expenditure function on a scale diagram along the 45 degree line What is the equilibrium level of national income? b) The marginal propensity to spend in this economy is 075 What is the value of the multiplier? c) Using your answer from part (b), what would be the change in equilibrium national income if desired investment increased to 250? Can you show this in your diagram? d) Now suppose household wealth increased from 10000 to 15000 What happens to the AE function and by how much does this national income change?
Subject:EconomicsPrice: Bought3
The marginal propensity to spend in this economy
Consider an economy characterized by the following
equations:
C = 500 + 075Y + 005W
I = 150
where C is desired consumption, I is desired investment, W
is household wealth, and Y is national income
a) Suppose W=10,000 Draw the aggerate expenditure function
on a scale diagram along the 45 degree line What is the equilibrium level of
national income?
b) The marginal propensity to spend in this economy is 075
What is the value of the multiplier?
c) Using your answer from part (b), what would be the change
in equilibrium national income if desired investment increased to 250? Can you
show this in your diagram?
d) Now suppose household wealth increased from 10000 to
15000 What happens to the AE function and by how much does this national
income change?
