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Suppose the marginal propensity to consume is 60% and the marginal propensity to save is 40%. Income is $2,000, taxes are $220, and government spending is $300. Find a numerical value for:

Consumption:
Investment:
Private saving:
National saving:
Government saving

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Casey Durgan
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5 May 2018

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Related questions

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.

a. Complete the table. What is the marginal propensity to save? What is the marginal propensity to consume?

b. Draw a graph of the consumption function. Then add the investment function to obtain C + I.

c. Under the graph of C + I, draw another graph showing the saving and investment curves. Note that the C + I curve crosses the 45-degree reference line in the upper graph at the same level of real GDP where the saving and investment curves cross in the lower graph. (If not, redraw your graphs.) What is this level of real GDP?

d. What is the numerical value of the multiplier?

e. What is equilibrium real GDP without investment?

What is the multiplier effect from the inclusion of investment?

f. What is the average propensity to consume at equilibrium real GDP?

g. If autonomous investment declines from $400 to $200, what happens to equilibrium real GDP?

(Answer the following questions based on the given data.)

**Please show work/formulas**

Consumption and Savings Schedule

Complete the following schedule (savings, APC, APS, MPC, & MPS):

DI C S APC APS MPC MPS
240 244
260 260
280 276
300 292
320 308
340 324
Key: DI = Disposable Income, C=Consumption, S=Saving, APC = Average Propensity to Consume, APS=Average Propensity to Save
MPC=Marginal Propensity to Consume, MPS=Marginal Propensity to Save
2. What are the 2 main tools the government can use with fiscal policy?
3. What is the goal of expansionary fiscal policy and how is it achieved?
4. What is the current level of total public debt for the United States, and what percent is foreign-owned?

1. Assume the following values of an economy.

Planned Investment (Ip)= $20

Autonomous Consumption (C )= $30

Marginal Propensity to consume (MPC)= .9

a. What is the equilibrium income?

b. What is the value of saving at equilibrium?

c. Does the saving and Investment Identity hold true at equilibrium income OR GDP?

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