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ECN 360 HOMEWORK SOLUTIONS

ECN 360 HOMEWORK SOLUTIONS

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12-2. Consider the table below when answering the following questions. For this hypothetical economy, the marginal propensity to save is constant at all levels of real GDP, and investment spending is autonomous. There is no government. (See pages 253–263.)
12-4. Calculate the multiplier for the following cases.
(See page 267.)
 
 
 
a. MPS = 0.25
 
 
 
b. MPC = 5/6
 
 
 
c. MPS = 0.125
 
 
 
d. MPC = 6/7
 
 
 
 
 
 
 
 
12-6. The marginal propensity to consume is equal to 0.80. An increase in household wealth causes autonomous consumption to rise by $10 billion.
By how much will equilibrium real GDP increase at the current price level, other things being equal? (See page 267.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12-12. Consider the diagram below, which applies to a nation with no government spending, taxes, and net exports. Use the information in the diagram
to answer the following questions, and explain your answers. (See pages 253–263.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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