Given the value of the multiplier you calculated in part b, what marg.docx - Given the value of the multiplier you calculated in part b what marginal

# Given the value of the multiplier you calculated in part b, what marg.docx

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Given the value of the multiplier you calculated in part b, what marginal propensity to save would have led to that value of the multiplier? c. Exercise 4 (10 points) The accompanying table shows gross domestic product (GDP), disposable income (Yd) consumer spending (C) and planned investment spending planned in an economy. Assume there is no government or foreign sector in this economy Iplanned GDP AEplanned Iunplanned Yd (billions of dollars) \$0 \$100 \$300 300 400 400 400 700 300 800 800 1200 1600 2000 1000 300 1200 1300 1600 300 2000 300 1600 1900 2200 300 2400 2400 2800 300 2800 3200 300 3200 2500 a. Complete the table by calculating planned aggregate spending (AEplanned) and unplanned inventory investment (unplanned). b. What is the aggregate consumption function? c. What is Y*, income-

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Unformatted text preview: expenditure equilibrium GDP? d. What is the value of the multiplier? e. If planned investment spending falls to \$200 billions, what will be the new Y? f. If autonomous consumer spending rises to \$200 billions, what will be the new Y*? Exercise 3 (15 points) A change in autonomous consumption results in a change in real GDP equal to \$200 million. Assume the absence of taxes, international trade, and changes in the aggregate price level. a Suppose that the MPC is equal to 0.75. What was the size of the change in autonomous consumption that resulted in the increase in real GDP of \$200 million? b. Now suppose that the change in autonomous consumptionn was \$20 million. What value of the multiplier would result in an increase in real GDP of \$200 million?...
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