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Unformatted text preview: University of Southern California Department of Economics ECON 205 Principles of Macroeconomics Spring 2009 Prof. Safarzadeh Assignment # 5B Student Name :_________________ I- Fill in the Blanks for the following Questions: 1- Suppose disposable income increases from $2 trillion to $3.5 trillion. At the same time, consumption expenditure increases from $1.8 trillion to $3.0 trillion. Thus the MPC must equal __________, MPS must equal________ , the spending multiplier must equal ___________. 2- Answer the following questions using the table below: Disposable income (billions of dollars) Consumption expenditure (billions of dollars) 400 450 600 600 800 750 1000 900 1200 1050 a) Based on the above table, if disposable income is $400 billion, consumption equals $ _______ and saving equals _____________________ b) Based on the above table, saving equals $100 billion when disposable income equals ______ c) Based on the above table, the MPC for the consumption function is _____________ 3- If the MPC equals 0.75, then for every $100 increase in consumption expenditure, disposable income increases by $__________. 4- Suppose real GDP increases from $4 trillion to $5 trillion. As a result, consumption expenditure increases from $4 trillion to $4.75 trillion. This result implies the MPS equals ________ 5- If the MPC increases from 0.75 to 0.80, the multiplier _____________from __________ to _________....
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- Spring '07