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What is the marginal propensity to consume

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Q1 Income goes up by $100 mn, consumption goes up by $30 mn. What is the Marginal Propensity to Consume?

Q2 If autonomous consumption demand is $50 mn, marginal propensity to consume is 0.5. Income is $1000 mn. What is the consumption demand in the economy?

Q3 Let the Consumption function be C = c + c' Y and investment function is I = I - b'I. Solve for equilibrium level of Y. Clearly show the steps and multiplier.

Q4. If C = 300+ 0.3Y, I = 500 and G = 1000 + 0.2Y. 

(A) Solve for Y

(B) What is the value of the multiplier? Briefly discuss what does the value of the multiplier indicate?

Q5. What happens to the multiplier effect if the marginal propensity to consume increases?

Q6 According to Keynes, what causes recessions? What was the suggestion given to policymakers by keynes?

Q7. What are the objections made by economists to Keynes suggestion to bring the economy out of recession?

Q8. Consider the consumption function with a lumpsum tax C= C + c'(Y-T); if T = $100 mn, C' = 0.5, Y = $500mn and C = $30. What is the consumption demand? What is the consumption demand when there is no lumpsum tax?

Reference no: EM132414995

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