Macroeconomic Questions Consumption and GDP
Homework Answers
Change in consumption is same at every level. That is, (3000-2880)= 120.
Change in GDP is same at every level. That is, (2600-2400)= 200.
| C | GDP |
| 2640 | 2400 |
| (2640+120)=2760 | 2600 |
| 2880 | 2600+200= 2800 |
| 3000 | 3000 |
| (3000+120)=3120 | 3200 |
| 3240 | 3200+200=3400 |
| 3360 | 3600 |
1. MPC=(Change in C/Change in Y) = (120/200)= 0.60.
MPS = 1-MPC = 1-0.6 = 0.40.
Multiplier = 1/1-MPC = 1/1-0.60= 1/0.40= 2.5
2. If the net exports increases by 250 mln , then equilibrium GDP would increase by (250)(2.5)= 650 mln.
Earlier equilibrium GDP is when C=GDP i.e 3000.
Now, the new equilibrium GDP = (3000+650)= 3650.
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Macroeconomic Questions Consumption and GDP
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