QUESTION.

Problem 1:

Suppose the level of autonomous investment in an economy is SR 200 billion and consumption function of the economy is :

C = 100 + 0.80 Y .

(a) What is the value of MPC ?

(b) What is the value of MPS ?

(C) What is the value of the multiplier ?

(d) What will be the equilibrium level of income ?

(e) What will be the increase in national income ( Y ) if investment ( I ) increases by SR 25 billion ?