Title | Written assignment 3 (practicals) |
---|---|
Author | Tahiru Nasara |
Course | Macroeconomics |
Institution | University of the People |
Pages | 2 |
File Size | 42.2 KB |
File Type | |
Total Downloads | 112 |
Total Views | 201 |
This is a written assignment on macroeconomics...
ANSWERS
1. Marginal propensity to consume is equal change in consumption divided by change in income. MPC= Change in Consumption/ Change in income Quantity consumed (6, 7) Income (3, 5) (7-6) _____ = (5-3)
½ or 0.5
Therefore the consumption increased by 50%
2. Savings = Earnings - Consumption = 10 - 12 = -2 units This means that savings cash is reducing by 2 units each time consumption is done.
3. Multiplier = change in real GDP at each price/ initial change in component of AD Change in GDP price at each price= 9 Change in component aggregate expenditure= 3 Multiplier= 9/3 =3 Therefore multiplier is 3
4. Multiplier = final change in national income / initial injection of aggregate demand Therefore the size of the national income multiplier must be 3 The formula for the simple multiplier is 1/MPS or 1/ (1-MPC) MPC + MPS = 1 If the multiplier is 3 then the marginal propensity to save must be 1/3 and the marginal propensity to consume must be 2/3
Multiplier formula = 1/MPS
= 1/ (1/3) =1X3/1 =1X3 =3 Therefore the multiplier is 3 when marginal propensity consumed is 1/3
5. Tax multiplier= -MPC/ (1-MPC) Tax multiplier= 5 5= -MPC _____ (1-MPC) 5(1-MPC) = -MPC 5 =-MPC+5MPC 5 = 4MPC MPC=1.25 Therefore the marginal propensity save is 1.25....