Question

4. Using the above information. Fill in the remaining two columns.

Disposable Income	APC	APS	MPC	MPS
$1000	1.0	0.0	-------------	-------------
1500	0.93	.07
2000	0.90	0.10
2500	0.88	0.12

5. Based off your findings. What is the Multiplier at a disposable income of $2000?

6. If the initial spending is $10,000; what would be the total change in GDP be?

Answer 1

4. APC = Total Consumption / Disposable Income

Total Consumption = APC x Disposable Income

APS = Total Saving / Disposable Income

Total Saving = APS x Disposable Income

MPC = Change in Consumption / Change in Disposable Income

MPS = 1 - MPC

MPS = Change in Savings / Change in Disposable Income

5. Multiplier = 1/MPS or 1/(1 - MPC) = 1/0.19 = 5.26

6. Change in GDP = 10,000/(1 - MPC) = 10,000/0.19 = 52631.58