What is the marginal propensity to consume in Freedonia, and what is the marginal propensity to

profiledomimokaya
 (Not rated)
 (Not rated)
Chat

You are given the following data concerning Freedonia, a legendary
country:
(1) Consumption function: C = 200 + 0.8Y
(2) Investment function: I = 100
(3) AE  C + I
(4) AE = Y
a. What is the marginal propensity to consume in Freedonia,
and what is the marginal propensity to save?
b. Graph equations (3) and (4) and solve for equilibrium income.
c. Suppose equation (2) is changed to (2´) I = 110.What is the
new equilibrium level of income? By how much does the
$10 increase in planned investment change equilibrium
income? What is the value of the multiplier?

    • 11 years ago
    microeconomics
    NOT RATED

    Purchase the answer to view it

    blurred-text
    • attachment
      175295_35687_1_tm_c_solution0-1-0-1no.490-1link0-1-0-183035.docx