Give an hypothetical numerical example to show the relationship between the marginal propensity to consume (MPC)...

Give an hypothetical numerical example to show the relationship between the marginal propensity to consume (MPC) and the multiplier (m)? How do you conclude the relationship between these two? b. Considering both the Keynesian and the aggregate demand-supply frameworks, if households as a group experience an increase in wealth at a given price level, what happen to total expenditure (TE), aggregate demand (AD) and Real GDP. Illustrate and explain the changes using a suitable graph.

Expert Solution

Rahul Sunny answered 1 year ago

. Give an hypothetical numerical example to show the relationship between the marginal propensity to consume...

. Give an hypothetical numerical example to show the relationship between the marginal propensity to consume (MPC) and the multiplier (m)? How do you conclude the relationship between these two? b. Considering both the Keynesian and the aggregate demand-supply frameworks, if households as a group experience an increase in wealth at a given price level, what happen to total expenditure (TE), aggregate demand (AD) and Real GDP. Illustrate and explain the changes using a suitable graph.

Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.50. That is,...

Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.50. That is, if disposable income increases by $1, consumption increases by 50¢. Suppose further that last year disposable income in the economy was $400 billion and consumption was $300 billion. On the following graph, use the blue line (circle symbol) to plot this economy's consumption function based on these data. 01002003004005006007008007006005004003002001000-100CONSUMPTION (Billions of dollars)DISPOSABLE INCOME (Billions of dollars)Y-Intercept: 100Slope: 0 From the preceding data, you know...

What type of relationship exists between the marginal propensity to consume (MPC) and the multiplier? Explain...

What type of relationship exists between the marginal propensity to consume (MPC) and the multiplier? Explain why this relationship exists. Give a hypothetical numerical example to help support your answer.

Real GDP, consumption, and the marginal propensity to consume (MPC) for five hypothetical countries are shown...

Real GDP, consumption, and the marginal propensity to consume (MPC) for five hypothetical countries are shown in the table below. a. Enter the current level of saving in the appropriate column in the table. b. Now suppose that GDP increases by $20 billion in each of the five countries. What would be the new level level of saving in each country? Show your answers in the table below. Country Real GDP (Billions) Consumption (Billions) MPC Current Level of Saving (Billions)...

If the marginal propensity to consume (MPC) is 0.9, then the multiplier for a change in...

If the marginal propensity to consume (MPC) is 0.9, then the multiplier for a change in autonomous spending will be A. 100. B. 0.1. C. 10. D. 9.

1. What is the multiplier if the marginal propensity to consume (MPC) is 0.5? Calculate the marginal propensity to save (MPS)?

1. What is the multiplier if the marginal propensity to consume (MPC) is 0.5? Calculate the marginal propensity to save (MPS)?2. What is the multiplier if the MPS is 0.2? Calculate the MPC.3. As a percentage of GDP, savings accounts for a larger share of the economy in the country of Scania compared to the country of Amerigo. Which country is likely to have the larger multiplier? Explain.4. Assuming that the aggregate price level is constant, the interest rate is...

the following the average marginal propensity to consume (MPC) is c1 = .52. They then looked...

the following the average marginal propensity to consume (MPC) is c1 = .52. They then looked at how different groups had different marginal propensities to consume. In particular: For Group 1 of Italians, their MPC is c1 = .3 For Group 2 of Italians, their MPC is c1 = .65 Now, take the following hypothetical situation about the Italian economy: M = X = 0 G = 500, Tp=500 C = 1000 + c1(Y-Tp) I = 200 Round to two...

The Potter family has a marginal propensity to consume (MPC) of 0.70. If their disposable income...

The Potter family has a marginal propensity to consume (MPC) of 0.70. If their disposable income increases by $500, what happens to their consumption and saving? Select one: a. Consumption rises by $700, and saving falls by $200. b. Consumption rises by $350, and saving falls by $150. c. Consumption rises by $350, and saving rises by $150. d. Consumption rises by $700, and saving rises by $300. e. It depends on their marginal tax rate. If Canadians expect future...

The Giladi family has a linear consumption function with a marginal propensity to consume (MPC) of...

The Giladi family has a linear consumption function with a marginal propensity to consume (MPC) of 0.6, and the Sharoni family has a linear savings function with a marginal propensity to save (MPS) of 0.6. Autonomous consumption (Co) is positive, Thus: a. There is a level of income at which the Giladi family’s consumption equals savings. b. There is a level of income at which the Sharon family’s consumption equals savings. c. It is impossible to determine if in the...

Consider an economy, but don't know the marginal propensity to consume (MPC) for the average person....

Consider an economy, but don't know the marginal propensity to consume (MPC) for the average person. If the government decides to increase its government spending by 1 billion dollars in education (building more public schools, etc.) To nance the increase in government spending, the government decides to increase tax by 1 billion dollars as well. How would the GDP respond to this series of change in the Goods Market Equilibrium? Explain.

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