What is the value of the marginal propensity to consume

Reference no: EM13697354

Consider a simple economy in which investment is constant and equal to $100 billion. There is no government or foreign sector, and the price level is constant. Consumption is

C = $40 billion + 0.75Y.

a. What is the value of the marginal propensity to consume?

b. What is consumption at an output of $1,000 billion?

c. What is the equilibrium GDP in this model?

d. What is the value of the multiplier?

e. What happens to equilibrium GDP should investment demand fall to $80 billion?

Reference no: EM13697354

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