Question

Questions 12 – 14. Assuming the level of investment is $12 billion and independent of the level of total output, complete the following table and determine the equilibrium levels of output and employment in this private closed economy.

Levels of Employment (Millions)	GDP = DI (Billions)	Consumption (Billions)	Savings (Billions)
60	$330	$390
65	$360	$402
70	$390	$414
75	$420	$426
80	$450	$438
85	$480	$450
90	$510	$462
95	$540	$474
100	$570	$486

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Question 121 pts

What is the size of the MPC?

Group of answer choices

0.60

0.30

0.40

0.50

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Question 131 pts

What is the size of the MPS?

Group of answer choices

0.60

0.50

0.30

0.40

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Question 141 pts

What is savings at the 95 million level of employment?

Group of answer choices

$66 billion

$30 billion

$12 billion

$54 billion

Answer 1

Level of employment	GDP = DI	Consumption	Saving
60	330	390	-60
65	360	402	-42
70	390	414	-24
75	420	426	-6
80	450	438	12
85	480	450	30
90	510	462	48
95	540	474	66
100	570	486	84

Disposable income (DI) = Consumption (C) + Saving (S)

=> S = DI - C

(1) We can see that every $30 billion increase in DI leads to $12 billion increase in Consumption

=> Change in DI = $30 billion

=> Change in Consumption = $12 billion

MPC = (Change in Consumption / Change in DI)

MPC = ($12 billion / $30 billion)

MPC = 0.4

Answer: Option (C)

(2) MPC + MPS = 1

=> MPS = 1 - MPC

=> MPS = 1 - 0.4

=> MPS = 0.6

Answer: Option (A)

(3) Saving at the 95 million level of employment is $66 billion.

Answer: option (A)