Assuming the level of investment is $16 billion and independent of the level of

Question

Assuming the level of investment is $16 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. What are the sizes of the MPC and MPS?

Instructions: In the table below enter whole numbers for your answers. For any negative number be sure to include a negative sign (-) in front of the number.



possible level real domestic consumption savings
emplymnt(millions) output(bill.) (bill.) (bill.)
40 $240 $244 $___
45 260 260 $___
50 280 276 $___
55 300 292 $___
60 320 308 $___
65 340 324 $___
70 360 340 $___
75 380 356 $___
80 400 372 $___





Equilibrium GDP = $ ____ billion

Equilibrium level of employment =_____ million

Instructions: Round your answer to one decimal place.

MPC =

MPS =

Explanation / Answer

Saving data for completing the table (top to bottom): $-4; $0; $4; $8; $12; $16; $20; $24; $28.

            Equilibrium GDP = $340 billion, determined where (1) aggregate expenditures equal GDP (C of $324 billion + I of $16 billion = GDP of $340 billion); or (2) where planned I = S (I of $16 billion = S of $16 billion). Equilibrium level of employment = 65 million; MPC = .8; MPS = .2.

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