What is the marginal propensity to consume in this economy

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Reference no: EM13185340

An economy has a break-even point of $3,000. For every additional dollar earned by households, they spend 80 cents. Government purchases $596 in goods and services and also spends $742 in transfer payments. Businesses invest $53 in plant, equipment and inventory. Foreign buyers purchase $60 and buyers from the United States purchase $56 from foreign countries. (All spending and income figures are in billions.) The Unemployment Rate is 8.0% and the NRU is estimated to be about 5%.

1. What is the marginal propensity to consume in this economy?
2. What is the multiplier in this economy?
3. What is the equilibrium level of GDP in this economy?
4. What is the equilibrium level of Aggregate Expenditures in this economy?
5. At equilibrium, what is the level of Consumption in this economy?
6. By how much will equilibrium change if foreigners increase their expenditures by $4?

Reference no: EM13185340

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