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c 1 = the marginal propensity to consume (the gradient of induced consumption) (0
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If the government wants to close the existing GDP gap, calculate the change in spending (specify whether an increase or decrease) that would have to be undertaken. Consumption Consumption 0 10 20 70 80 90 100 30 40 50 60 Disposable income a. Shift the consumption curve to show an autonomous decrease in consumption of 10. In the accompanying diagram, autonomous consumption Income Expenditure c. Illustrate the GDP gap using the AD-AS Model and the AE Model, if the natural level of income is estimated as $460,000 million. O consumption undertaken by society as a whole rather than particular individuals. (60-word limit)Ĭalculate the expenditure and tax multipliers for the economy (solve to two decimal points).Īssume that your economy is now operating at the equilibrium level in the short-run as calculated in part (7). In your own words, briefly explain what the marginal leakage rate symbolises for the economy. These expenses cannot be eliminated, regardless of limited personal income. Autonomous consumption involves the consumption of products and services that must be purchased whether an individual has an income or not including essentials. Is this economy in equilibrium when income equals $520,240 million? If not, what is the equilibrium level of income for this economy? (solve to one decimal point).Ĭalculate the marginal leakage rate (solve to one decimal point). Autonomous consumption is defined as the expenditures that consumers must make even when they have no disposable income. Calculate the level of autonomous consumption when the level of income equals $520,240 million (solve to one decimal point).Ĭalculate the level of total savings when the level of income equals $520,240 million (solve to one decimal point).Ĭalculate the level of actual investment when income is equal to $520,240 million and the unintended inventory investment (solve to one decimal point).Ĭalculate autonomous imports when income is equal to $520,240 million (solve to one decimal point).Ĭalculate autonomous net exports (solve to one decimal points).Ĭalculate autonomous planned expenditure (solve to one decimal point).