Disposable income

425

550

675

800

925

consumption expenditure

460

560

660

760

860

i)Whatis marginal propensity to consume (MPC) andcalculate theMPC.Show your calculationandinterpretwhat the MPC you calculated mean.

Assuming there is no change in net taxes and imports,calculatethe Keynesian expendituremultiplierusing the information you obtained in (i). Thencalculatethechange in real GDPusing the multiplier you calculated when government increases its spending on rail and road reconstruction by $30 billion.