1. First provide the correct equation and then show your work to arrive to the answer:
The marginal propensity to consume (MPC) refers to the quantity of a cumulative raise in pay that a consumer spends on the consumption of goods and services, and it is the change in consumption divided by the change in disposable personal income, in another word, the ratio of the change in consumption (ΔC) to the change in disposable personal income (ΔYd) (Rittenberg & Tregarthen, 2012).
Equation: MPC = ΔC ÷ ΔYd
2. What is the marginal propensity to consume when consumption changes from 7 to 6 and disposable income changes from 5 to 3?
Consumption was changed from 7 to 6.
7 - 6＝1
Disposable income was changed from 5 to 3.
5 - 3＝2
MPC = ΔC ÷ ΔYd
X ＝ 1 ÷ 2＝0.5
A. 0.5
3. If disposable personal income is 10 and consumption is 12, what is personal savings? What does this mean?
"Personal saving is disposable personal income not spent on consumption during a particular period; the value of personal saving for any period is found by subtracting consumption from disposable personal income for that period" (Rittenberg & Tregarthen, 2012, p.522).
Personal Saving = Disposable personal income – consumption
Personal Saving = 10 – 12 = -2
A. -2
4. What is the multiplier when the change in equilibrium level of real GDP in the aggregate expenditures model is 9, and change in autonomous aggregate expenditures is 3?
The multiplier is the number by which we multiply an initial change in aggregate demand to get the full amount of the shift in the aggregate demand curve, and it shows the ratio of the changes in the quantity of real GDP demanded at each price level to the initial change in one or more components of aggregate demand that produced it (Rittenberg & Tregarthen, 2012).
Equilibrium level of real GDP in the aggregate expenditures model ＝ ΔYeq
change in autonomous aggregate expenditures ＝ ΔA
Equation: Multiplier = ΔYeq ÷ ΔA
9 ÷ 3＝3
A. 3
5. What is the multiplier when the marginal propensity to save is 1/3?
The marginal propensity to consume (MPC) refers to the quantity of a cumulative raise in pay that a consumer spends on the consumption of goods and services, and it is the change in consumption divided by the change in disposable personal income, in another word, the ratio of the change in consumption (ΔC) to the change in disposable personal income (ΔYd) (Rittenberg & Tregarthen, 2012).
Multiputer＝1 ÷ MPC
MPC has saved 1/3
1 ÷ 3＝0.333333...
1 ÷ 0.333...＝3.0303...
A. 3(3.0303...)
6. What would happen to the marginal propensity to save when a tax cut was enacted causing the multiplier to change to 5?
Multiputer＝1 ÷ MPC
5＝1 ÷ X
X＝1 ÷ 5
X＝0.2
A. 0.2
References
Rittenberg. L & Tregarthen. T (2012). Macroeconomics Principles v.2.0 textbook. Retrieved from https://my.uopeople.edu/pluginfile.php/136135/mod_resource/content/1/TEXT
%20macroeconomics-principles-v2.0.pdf
댓글