Homework Assignment II (5 p.) due Thursday, 05/02, before class. Please use canvas to submit your answers (as doc, docx, pdf).
Answer the following questions.
1) Assume the following values: Marginal Propensity to Consume (MPC) b = 0.8; Autonomous Consumption a = 250; Investment Spending I = 500. There is no government spending at this point.
a) For a consumption function C = a bY, what is the equilibrium value for income Y in the economy (Y = C I, here)? (1)
b) What is the value of Y if Investment Spending increases to 750? (0.5)
c) What can you observe in the change in Y that follows changes in I? How is the effect called that is apparent in your results? (1)
d) If you add the government sector, with expenditure G = 250, what is the new equilibrium income? (For I = 750) (0.5)
2) What happens when the Marginal Propensity to Save (MPS) is reduced? How does equilibrium output change? (1)
3) Use the MPS to explain the paradox of thrift. (1)
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.
Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.
Read more