Question 19) Equations for C, I, G, and NX are given below. If the equilibrium l

Question

Question 19) Equations for C, I, G, and NX are given below. If the equilibrium level of GDP is $32,000, what is the marginal propensity to consume? C-5,000+ (MPC)Y, I-1,500, G-2,000, NX--500 Question 20) Suppose we are looking at an economy where the real GDP is given Real GDP C Planned Unplanned I s economy in Expenditure Inventorjy ventoryEquilibrium? Change 2000 2500 3000 3500 4000 4500 5000 5500 Suppose that the consumption function for this economy is given by the equation: C 500 + 0.8 Y And the exogenously determined level of investment is $300 (irrespective of the level of Real GDP) a) b) Based on the above information complete the blanks in the above table. Draw a graph for the economy and label the level of real GDP when the economy is in equilibrium

Explanation / Answer

19

In the equilibrium

Y = C+I+ G+NX

Y= 5000+cY + 1500+2000-5

At equilibrium Y = 32000. This implies

32000= 8000+32000c

24000=32000c

c =24000/32000

c =0.75, MPC is 0.75

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