What is the value of marginal propensity to consume in model

Reference no: EM131093481

Econ 111: Principles of Economics - Accelerated Treatment - Quiz 8

Consider the following numerical example of the simple Keynesian model with no government spending or taxes (all figures in $billions):

C = 100 + 0.9 Y

I = 50

a) What is the value of marginal propensity to consume (MPC) in this model? The marginal propensity to save (MPS)?

b) Solve for the equilibrium GNP algebraically. (Hint: Use the equilibrium condition Y=C+ I).

c) In equilibrium what is the value of consumption spending?

d) What is the value of investment multiplier in this economy?

Reference no: EM131093481

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