Ass ume that the following data represents what people in Ecoland might plan to

Question

Ass ume that the following data represents what people in Ecoland might plan to spend and save given various levels of income lall tigures in billions). Disposable Consumption Savings Income $100 $125 $150 $175 $200 $225 $250 $110 $125 $140 $155 $170 $185 $200 $10 $0 $10 $20 $30 $40 $50 Given this data, what is the Marginal Propensity to Consume (MPC) in Ecoland? (-) 3096 o 45% 16096 O$25 billion QUESTION 2 1 point The multiplier can be calculated suing which of the following formula(s)? 1/ (1-MPC) O 1/ MPS Change in Real GDP / Initial Change in Spending O All the above

Explanation / Answer

Q1. Option 60%

MPC = (Change in Consumption)/(Change in disposable income)
= (125 -110)/(125- 100)
= 15/25
=0.60
=60%

Q2. All of the above.
All three can be used to calculate multiplier - 1/(1-MPC) or 1/MPS or Change in real GDP/Initial Change in spending

Q4. $10 billion
Multiplier = 1/MPS (see Q2) and change in investment = $5 billion.
Total new spending = 5/.50 = 5*2 = 10

Q5. Option 3
By definition, 45 degree line shows all the points where consumption = disposable income.

Q6. Option 4: 40%
MPS = Change in Savings/Change in disposable income
= (0-(-10))/(125-100)
= 10/25
=0.40
=40%

PS: According to Chegg rules, in the event of multiple MCQs, only the first 4 are attempted

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