Question
Kindly Show the complete solution steps by steps and then circle the final answer 1. Suppose a family's annual disposable income is P100,000 of which
Kindly Show the complete solution steps by steps and then circle the final answer
1. Suppose a family's annual disposable income is P100,000 of which it saves P20,000. If their income rises to P120,000 and they plan to save P28,000, what are their marginal propensity to consume (MPC) and marginal propensity to save (MPS)?
2. Suppose that for a particular economy and period, investment was equal to 100, government expenditure was equal to 75, net taxes were fixed at 100, and consumption (C ) was given by the consumption function C=25+0.8YD where YD is disposable income and Y is GDP.
2.1. What is the level of the equilibrium level of income? (Y) Is the economy running with a trade deficit or trade surplus? How much?
2.2. What is the value of the government expenditure multiplier? Of the tax multiplier?
2.3. Suppose that investment declined by 40 units to a level of 60. What will be the new equilibrium level of income?
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