{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

answerstopracticequestions6spring2004

answerstopracticequestions6spring2004 - Economics 102...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics 102 Spring 2004 Practice Question 6 Answers 1. Given that C=500+0.8*Y D fill in the table below. Income or GDP Taxes Disposable Income Consumpti on Investment Gov't Purchases Aggregate Expenditure 2,000 1000 1,000 1,300 600 300 2,200 2,500 1000 1,500 1,700 600 300 2,600 3,000 1000 2,000 2,100 600 300 3,000 3,500 1000 2,500 2,500 600 300 3,400 4,000 1000 3,000 2,900 600 300 3,800 4,500 1000 3,500 3,300 600 300 4,200 a. 3,000 b. When GDP is 4,000 inventories are increasing by 200. GDP-AE=4000-3800=200. When GDP is 2,000 inventories are decreasing by 200. 2000-2200=-200. 2. a. MPC=0.75. This tells us that when disposable income increases by one dollar our consumption spending will increase by 75 cents. b.1300, this is the part of consumption spending that is independent of income. If our disposable income was 0 we would still spend 1300 on consumption. c. the consumption income line is the lower one of the two.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
0 2000 4000 6000 8000 10000 12000 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 Income Spending d. 8000 e. i)5000 ii) 4000 iii) –1000 f. i)9500 ii)8500 iii) 500 g. The change in inventories is the vertical distance between the 45 degree line and the aggregate expenditure line where income equals 4,000. 3. a. MPC=0.80 b. 800 c. 800;1200 d. Y=C+G+I+NX
Background image of page 2
Background image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}