mpc.docx - a Explain the concepts of marginal propensity to consume(MPC and marginal propensity to save(MPS(2pts The MPC is the fraction of any

mpc.docx - a Explain the concepts of marginal propensity to...

This preview shows page 1 - 2 out of 2 pages.

a) Explain the concepts of marginal propensity to consume (MPC) and marginal propensity to save (MPS). (2pts) The MPC is the fraction of any additional income that is consumed (spent on consumption) while the MPS the fraction of any additional income that is saved. b) What is the MPC for this economy? (2pts) The MPC for this economy is 0.4 c) Explain the concepts of the autonomous spending and tax multipliers. (2pts) The autonomous tax multiplier is a multiple by which equilibrium income changes when any component of autonomous spending changes. The autonomous tax multiplier is the multiple by which equilibrium income changes when there is a change in autonomous tax. d) What is the autonomous spending multiplier for this economy? (2pts) The autonomous spending multiplier for this economy is: 1/1−MPC = 1/1−0.4 = 1.67 e) What is the equilibrium level of income for this economy? (3pts) In equilibrium Y=AD. ????D =????+????+???? = 320+0.4(????−200)+150+275
Image of page 1
Image of page 2

You've reached the end of your free preview.

Want to read both pages?

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes