Question
In 2020 in the country of Westland, the total disposable income, consumption, and saving are $400 billion, $300 billion, and $100 billion, respectively. In 2021,
In 2020 in the country of Westland, the total disposable income, consumption, and saving are $400 billion, $300 billion, and $100 billion, respectively. In 2021, that disposable income increases to $470 billion, consumption rises to $340 billion and saving goes up to $130 billion. Use this information to answer the following three questions.
1.Calculate the marginal propensity to consume and the marginal propensity to save in the economy of Westland and explain what those numbers actually mean. Calculate your answers to two decimals.
2.What were the average propensities to consume and to save in Westland before the increase in disposable income AND what were they after the increase? Explain, in your own words, what these numbers mean about the spending behavior of the citizens of Westland.
3.If businesses in Westland now increased their investment spending by $550 million, how exactly would Westland's GDP be affected?
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