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Homework 5 - ECONOMICS 002 Fall Semester 2009 Name Homework...

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ECONOMICS 002 Name: __________________________________________ Fall Semester 2009 Homework Assignment 5 TA and Time: __________________________________________ This is the last homework assignment and it is due on November 24 in class. Questions 1 and 2 deal with the material in Chapter 11 of the text. Questions 3 and 4 deal with the material in Chapter 12 of the text. Question 5 deals with the material in Chapter 13 of the text. 1. [30 points] The following table shows the relationship between income and consumption in an economy. Income (Y) (in billions of dollars) Consumption (C) (in billions of dollars) 0 5 10 11 20 17 30 23 40 29 50 35 60 41 70 47 80 53 90 59 100 65 Assume that investment (I) is $5 billion, government purchases (G) are $4 billion, and net exports (X) are $2 billion. a. What is the numerical value of the marginal propensity to consume? b. Construct a table that is analogous to Table 2 (page 287 of the text) for this economy. What is the level of income at the point of spending balance? Income or Real GDP Total Expenditu re C I G X
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c. For this level of income, calculate national saving. Is national saving equal to investment plus net exports?
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