80 there would be a 40 billion change in gdp if the

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investment is increased by $8 billion and the MPC is .80, there would be a $40 billion change in GDP. If the MPS is .67, there will be a $24.24 billion change in GDP. MPS Multiplier 0 None .4 2.5 .6 1.67 .1 1 MPC Multiplier 1 None .90 10 .67 3.03 .50 2 0 1 If MPC = .80 and ∆Ig =8 billion, ∆Equilibrium GDP = MULTIPLIER * ∆Ig
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∆Equilibrium GDP= 5*8 ∆Equilibrium GDP= $40 billion If MPC = .67 and ∆ = 8 billion ∆Equilibrium GDP = multiplier *∆Ig ∆Equilibrium GDP = 3.03 * 8 ∆Equilibrium GDP = $24.24 billion Chapter 28 pgs. 580-581 Questions #2,8,9 2. Possible Levels of Employme nt (Millions) Real Domestic Output (GDP=D I) (Billions) Consumptio n (Billions) Savings (Billions) Investmen t (Ig) Aggregat e Expenses (C+Ig) MPC MPS 40 $ 240 $244 $-4 $16 $260 0.8 0.2 45 $260 $260 $0 $16 $276 0.8 0.2 50 $280 $276 $4 $16 $292 0.8 0.2 55 $300 $292 $8 $16 $308 0.8 0.2 60 $320 $308 $12 $16 $324 0.8 0.2 65 $340 $324 $16 $16 $340 0.8 0.2 70 $360 $340 $20 $16 $356 0.8 0.2 75 $380 $356 $24 $16 $372 0.8 0.2
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80 $400 $372 $28 $16 $388 0.8 0.2 The Equilibrium level of output and employment in this private economy is at $340 billion, where Real GDP=AE a. State at the GDP level of $300 billion, the total amount of actual investment, planned investment and unplanned investment. At the $300 billion level of GDP, saving _ $8 billion; Planned investment = $16 billion (from the table). Unplanned investment = $ 8 billion, as a result of the excess of $8 billion of planned investment. Actual investment is $8 billion (= $16 billion of planned investment minus $8 billion of unplanned investment) matching the actual of $8 billion. b. State at the GDP level of $380 billion, the total amount of actual investment, planned investment and unplanned investment. At the $380 billion level of GDP, saving _ $24 billion; Planned investment = $16 billion (from the table). Unplanned = $8 billion caused by the deficiency of $ 8 billion of planned investment Actual investment = $24 billion (=$16 billion of planned investment plus $8 billion of unplanned
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