helpppppp (1 Viewer)

[piyo_extreme]

Y C I
100 110 50
200 190 50
300 270 50
400 350 50
500 430 50

7. According to the table, the marginal propensity to consume (MPC) in this example would be

A. 0.5
B. 0.8
C. 0.75
D. 30

8. If there was an increase in autonomous investment of $30, what would be the new level of equilibrium income?

A. $400
B. $550
C. $150
D. $800

 

[rn21]

7 = B
8 = C

 

[mattchan]

Q7) B
Q8) B

Umm, i'm not sure if these are right.

For Question 7, all i did was divide the change in consumption over the change in income, ie. 80/100 = 0.8

For Question 8, use the multiplier, 30 * 1/MPS = 30 * 1/0.2 = 150. Now 150 + 400 which was the equilibrium income = 550?

 

[Vampire]

*agrees with rn21*

 

[Haku]

yea its right.

for MPS its change in saving/change in income.

 

[Too right]

sorry but how do you get the answer for number 8 ???

 

[Haku]

u found the MPC to be 0.8, so MPS is 0.2

so 30/0.2 = 150

 

[mattchan]

Umm, but isnt the $150 just the change in national income after the increase of $30 in investment. Wouldnt you need to add the original equilibrium income on which was 400 = 350 + 50 ?

 

[Haku]

isn't the original equilibrium income 500?

 

[mattchan]

where did the 500 come from? Doesnt equilibrium occur when Y = C + I. 430 + 50 = 480, not 500

 

[Haku]

i was just reading the last figure in the table,

so wat is equiliburium income anywayz?

 

[Too right]

Sorry to bother ppl again but, as you previously wrote in order to get the answer for number 8 as being 150, did u use the formula of

Investment (divided by) Marginal propensity to save to get 30/0.2


where investment is 30 and MPS is 0.2


???

 

[Haku]

yea, but apparently that answer is not the full answer, u need to add the previous equilibrium income which i do not know how to get.!

 

[mattchan]

To get 150, thats just the simple multiplier where:

change in Income = k * change in aggregate demand

k = 1 / MPS

So sub in the numbers and you get the change in income.

And i was thinking you need to add on 400 onto 150 because equilibrium income currently is 400( 350 + 50 = 400). But then again, i could be wrong

 

[Haku]

where did u get that 350 + 50 from?

is it from the second last figure? y not use the last figure?

 

[Vampire]

good point...yeh maybe it is 550 then, can anyone confirm this?

 

[sarah kiss]

What is goin on

i work it out as multiplier equals change in income/change in consumption so i got 1.25 then i used that formula k=1/MPS, so

1.25=1/MPS
MPS= 1/1.25
MPS = 0.8

then since MPS + MPC = 1
so MPC = 0.2

well since this isnt even on the choices i must be doin sumthang wrong, but what isn't?

 

[sunjet]

firstly MPC = change in c / change in y
= 0.8
1 - MPC = MPS
MPS = 0.2

 

[word.]

         Y              C                 I
        100            110               50
        200            190               50
        300            270               50
        400            350               50
        500            430               50

by inspection, C = 30 + 0.8Y
also note equilibrium occurs when Y = C + I

so Y = 30 + 0.8Y + I,
0.2Y = 30 + I,
Y = 150 + 5*I
as I = 50, Y = 400 is the initial national income from equilibrium

if I = 50 + 30, then Y = 150 + 400
= 550

 

[sarah kiss]

still confused

when did the 30 cum from i noe its da autonous consumption but how do u get it