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Economics Expenditure Multiplier

Essay by   •  June 22, 2019  •  Course Note  •  342 Words (2 Pages)  •  258 Views

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Chapter (4) –

Exercise: Consider the following table

National income (Y)

Consumption (C)

Investment (I)

Government spending (G)

Aggregate expenditure (AE)

0

120

15

25

100

180

200

240

300

300

400

360

500

420

600

480

700

540

800

600

1

The value of autonomous consumption is

2

The value of autonomous investment is

3

The value of autonomous government spending is

4

The value of autonomous expenditure is  

5

The value of MPC

6

The value of MPS

7

Consumption function is

8

Saving function is

9

The value of equilibrium consumption is

10

The value of equilibrium expenditure is  

11

The size of multiplier is

12

What is the value of unplanned inventory when national income (y) = 700

13

Find new equilibrium expenditure when autonomous expenditure increase by $20

14

Find new equilibrium expenditure when autonomous expenditure decrease by $20

15

Draw AE curve, label your graph, show the equilibrium expenditure

Chapter (4) –

Exercise: Answers

National income (Y)

Consumption (C)

Investment (I)

Government spending (G)

Aggregate expenditure (AE)

Unplanned inventory UI

The country should

0

120

15

25

160

-160

Increase GDP

100

180

15

25

220

-120

Increase GDP

200

240

15

25

280

-80

Increase GDP

300

300

15

25

340

-40

Increase GDP

400

360

15

25

400

0

No change

500

420

15

25

460

40

Decrease GDP

600

480

15

25

520

80

Decrease GDP

700

540

15

25

580

120

Decrease GDP

800

600

15

25

640

160

Decrease GDP

...

...

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