Consider a simple Keynesian model without government spending or taxation. Suppose autonomous consumption is 500 and autonomous investment is 300 and the equilibrium level of output is 2400. Then the marginal propensity to consume is: Group of answer choices2/33/53Uncertain, not enough information.
Question
Consider a simple Keynesian model without government spending or taxation. Suppose autonomous consumption is 500 and autonomous investment is 300 and the equilibrium level of output is 2400. Then the marginal propensity to consume is: Group of answer choices2/33/53Uncertain, not enough information.
Solution
In the simple Keynesian model, the equilibrium level of output (Y) is determined by the sum of autonomous consumption (C), autonomous investment (I), and induced consumption, which is the marginal propensity to consume (MPC) times the level of income (Y). This can be expressed as:
Y = C + I + MPC*Y
Given that autonomous consumption (C) is 500, autonomous investment (I) is 300, and the equilibrium level of output (Y) is 2400, we can substitute these values into the equation:
2400 = 500 + 300 + MPC*2400
Solving for MPC, we get:
MPC = (2400 - 500 - 300) / 2400 = 1600 / 2400 = 2/3
So, the marginal propensity to consume is 2/3.
Similar Questions
In the Keynesian income-expenditure model, equilibrium income is necessarily equal to a multiple ofGroup of answer choicesthe autonomous component of consumption, regardless of whether the economy is closed or openthe exogenous component of planned aggregate expenditurethe marginal propensity to consume minus the sum of the marginal tax rate and marginal propensity to importnone of the other alternatives are correct.
Consider a simple Keynesian model with taxation. Suppose the marginal tax rate is t = 0.4 and the marginal propensity to consume is c = 0.66. Then an exogenous increase in investment demand of 100 units will: Group of answer choicesIncrease equilibrium output by approximately 150 unitsIncrease equilibrium output by approximately 167 unitsIncrease equilibrium output by approximately 267 unitsIncrease equilibrium output by approximately 750 units
Assume that the level of autonomous consumption in an economy equals 400, the level of planned investment = 400.Calculate the marginal propensity to consume, if the level of income equals 2,000?Provide answer to one decimal point.
Assume the economy is closed and there is no government. The aggregate demand components are described below:C = 100 + 0.6Y (1)I = 200 (2)Now there is a boost in investment, and total investment is not 300. What is the marginal propensity to consume?
Consider the following economy:(1) C = 1000 + 0.3 (Y - T)(2) I = 700(3) G = 500(4) T = 400What is the marginal propensity to consume?
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.