Reference no: EM131183260
hi, can you answer some questions?
1) Calculate the value of the consumption function at each level of disposable income in Table 1 if a = 100 and mpc = 0.9.
2) Plot the consumption function C = 100 + 0.75Y on graph paper.
a. Assuming no government sector, if planned investment spending is 200, what is the equilibrium level of aggregate output? Show this equilibrium level on the graph you have drawn.
b. If businesses become more pessimistic about the profitability of investment and planned investment spending falls by 100, what happens to the equilibrium level of output?
3) Why are the multipliers in Problems 3 and 4 different? Explain intuitively why one is higher than the other.
4) "A rise in planned investment spending by $100 billion at the same time that autonomous consumer expenditure falls by $50 billion has the same effect on aggregate output as a rise in autonomous consumer expenditure alone by $50 billion." Is this statement true, false, or uncertain? Explain your answer.
5) If the marginal propensity to consume is 0.5, how much would government spending have to rise in order to raise output by $1,000 billion?
6) What happens to aggregate output if both taxes and government spending are lowered by $300 billion and mpc = 0.5? Explain your answer.
7) If a change in the interest rate has no effect on planned investment spending, trace out what happens to the equilibrium level of aggregate output as interest rates fall. What does this imply about the slope of the IS curve?
8) "If the point describing the combination of the interest rate and aggregate output is not on either the IS or the LM curve, the economy will have no tendency to head toward the intersection of the two curves." Is this statement true, false, or uncertain? Explain your answer.
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