Slope of the aggregate expenditure curve, Macroeconomics

Assignment Help:

Consider an economy with the following characteristics:

i. The price-level is fixed

ii. The economy is closed (Exports - Imports = 0)

iii. Government spending (G) and Investment (I) are both constant

iv. Income (Y) and Savings (S) are both a function of Disposable Income (Yd)

v. Autonoumous savings are equal to -$40 billion

vi. Savings are equal to $80 billion when disposable income is $600 billion

a) What is the value of the marginal propensity to consume out of disposable income? Use this value to determine how much consumption would increase if transfer payments increased by $10 billion.

b) What is the value of the marginal propensity to consume out of income if the tax rate is equal to 0.3? Use this value to find the slope of the aggregate expenditure curve and the value of the simple (Keynesian) expenditure multiplier.


Related Discussions:- Slope of the aggregate expenditure curve

Describe wages and income, Q. Describe Wages and income? Remember that ...

Q. Describe Wages and income? Remember that by wage we characteristically mean what you receive for working one hour, whereas income is the total revenue from all sources over

AD-AS, THE AD CURVE SHIFT TO THE LEFT WHEN

THE AD CURVE SHIFT TO THE LEFT WHEN

As the result of a tariff who will benefit, In general, who will benefit as...

In general, who will benefit as the result of a tariff? Domestic Producers Domestic Consumers The domestic government a. I only b. II only c. both I and III d.

Concept of taxation, The Concept of Taxation is explained below: Taxes ...

The Concept of Taxation is explained below: Taxes are the general purpose, compulsory contributions by people to the public treasury (or national exchequer) to meet the expendi

Money, what are the three motives of holding money?

what are the three motives of holding money?

Elucidate elasticity of supply using the midpoint formula, An attorney supp...

An attorney supplies 40 hours of work per week when her fee is $100 per hour but supplies 60 hours of work per week when her fee rises to $120 per hour. Using the midpoint formula,

Calculate asset turnover, The following information has been extracted from...

The following information has been extracted from the recently published accounts of Noddy Plc:                           Balance sheet as at 31 st May

What is the meaning of capital - Gross domestic product, What is the meanin...

What is the meaning of Capital - Gross domestic product By capital we characteristically mean manufactured goods which are used to produce other goods and services though are

Perfectly competitive retail market, Why a perfectly competitive retail mar...

Why a perfectly competitive retail market is more competitive than a monopoly

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd