30. Assuming the level of investment is S11 billion and independent of the level

Question

30.

Assuming the level of investment is S11 billion and independent of the level of total output, complete the following table and determine the equilibrium levels of output and employment in this private closed economy. Instructions: In the table below, enter your answers in the gray shaded cells as whole numbers. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. . Equilibrium GDP = S Equilibrium level of employment =_ million. What are the sizes of the MPC and MPS? Instructions: Round your answers to 1 decimal place. MPC = MPS =

Explanation / Answer

As it is a private closed economy this means no government and no international trade, as there are no other factors here this means saving will be difference between Output and consumption so S=Y-C

a) At equilibrium Savings = Investment amd investment as told in the question is fixed at 11. From the table below we see that when Employment = 60 millions and Real GDP = 330 billions rhen savings is equal to investment.

Equilibrium GDP = $330 billions

Equilibrium Employment = 60 millions

b) MPC = Change in C / Change in Y = 16/20 = 0.8

MPS = Change in S / Change in Y = 4/20 = 0.2

Employment in Millions Real Y C S I 35 230 239 -9 11 40 250 255 -5 11 45 270 271 -1 11 50 290 287 3 11 55 310 303 7 11 60 330 319 11 11 65 350 335 15 11 70 370 351 19 11 75 390 367 23 11

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