Please check my work and let me know if you feel I completed everything correctly if not show me how you resolved the problem please to the next 5 problems.

1. Suppose disposable income increases by$2,000$2,000. As a result, consumption increases by$1,500$1,500. Answer the questions based on this information. Where appropriate, enter your answer as a decimal rather than as apercentage.

a. The increase in savings resulting directly from this change in incomeis

$500

b. The marginal propensity to save (MPS)is.25

c. The marginal propensity to consume (MPC)is .75

2. Income and consumption changes for five people are shown in the table. Given this information, rank the marginal propensities to consume (MPC) for the five people from largest tosmallest.

Largest MPC

Calvin

Derek

Aaron

Eugen

Basil

Smallest MPC

Answer Bank

Calvin

Arnold

Eugene

Doug

Bob

Name

Income change

Consumption change

Arnold

+$5,000+$5,000

+$3,000+$3,000

Bob

+$2,500+$2,500

+$800+$800

Calvin

+$1,000+$1,000

+$800+$800

Doug

$2,500$2,500

$1,750$1,750

Eugene

$5,000$5,000

$2,000$2,000

3.The multiplier (expenditure multiplier) is the ratio between which two measures?

marginal propensity to consume AND the size of an autonomous change in nominal GDP

total change in nominal GDP caused by an autonomous change in aggregate spending AND the size of the autonomous change in aggregate spending

total change in real GDP due to an autonomous change in aggregate spending AND the size of the autonomous change in aggregate spending

marginal propensity to save AND marginal propensity to consume

4. Suppose that Kim K decides to spend $30,000 on an Americanmade purse instead of donating it to Haitian earthquake relief. Assume that the multiplier is1.2.

How much will GDP rise when Kim K buys her purse according to the multipliereffect?

$36000

Buying the purse increases America's GDPmore

donating the money to Haitian earthquake relief. Suppose she instead donated to tornado relief in Joplin, MO. Buying the purse increases GDP

spending on tornadorelief. same

5. Complete the statements and then calculate the change in consumption.

The consumption function shows the relationship between consumption spending andDisposable Income

The slope of the consumption function is theMarginal propensity to Consume

Changes in consumption can be predicted by multiplying the change inDisposible Income

by theMarginal propensity to Consume

If theMPC=0.80MPC=0.80and disposable income increases by$1000$1000, then consumption will increase by what amount?Assume that there is no multipliereffect.

MPC =0.80

Disposible income increased by $1000

Therefore consumption will increase will increase by

.80 * $1000 =$800