Part 4. Economic Equations and Graphs 1. Compute the Multiplier (M) in each of the following cases: 5. Explain the two statements using the following figure: [ Use the formula: M = 1 / (1 - MPC)] AS a. MPC = 0.60: b. MPC = 0.80: C. MPC = 0.50: ADA AD2 O Q ON 2. Write an investment function (equation) that specifies two components: a. Autonomous investment spending and; a. According to Keynes, aggregate demand may be insufficient to bring about the full-employment output level (Natural Real GDP). b. Induced investment spending b. A decrease in consumption(due to increased saving) is not matched by an increase in investment spending 3. What is the relationship between the MPC and the multiplier? 6. In the figure below, explain what happens if: 45 Line B 4. Look at the Keynesian consumption function: C = C + (MPC x Yd). TE = C+/+G What part of it relates to autonomous consumption? What part of it relates to induced consumption? Define autonomous consumption and induced consumption. Q1 Q3 Real GDP a. The economy is at Q1. b. The economy is at Q2