Question

NGDP 30 The following table is a Macroeconomics information for given economy GDP CONSUMPTION INVESTNENGT GOVERNMENT INCOME EXPORTS IMPORTS GDP RXPENDITURE EXPENDITURE 100 30 180 200 30 260 350 440 530 620 700 710 900 1000 790 880 800 890 980 Use lecture one A. Find GDP Numeric and graphically. B. Calculate MPC AND MPS. C. Assume investment has gone down by 40, find new GDP Numeric and graphically.

Answer 1

Output	Consumption	Investment	Government Expenditure	Exports	Imports	GDP Expenditure	NGDP NGDP=C+I+G+(NX-IM)
100	70	70	30	30	20	180	180
200	160	70	30	30	20	260	270
300	250	70	30	30	20	350	360
400	340	70	30	30	20	440	450
500	430	70	30	30	20	530	540
600	520	70	30	30	20	620	630
700	610	70	30	30	20	710	720
800	700	70	30	30	20	800	810
900	790	70	30	30	20	890	900
1000	880	70	30	30	20	980	990

The graphical illustration is given in the following figure,

1000 Numeric GDP NGDP 900 -800 -700 -600 --500 -400 -300 200 -100 Output 1200 - 100 200 300 400 500 60 700 800 900 1000 1100

When Y = 100, C = 70 and when Y = 200 , C = 160

Change in income = 200 - 100 = 100

Change in consumption = 160 - 70 = 90

MPC = Change in consumption / Change in Income

MPC = 90 / 100 = 0.9

MPS = 1 - MPC

MPS = 1 - 0.9 = 0.1

When Investment reduces by 40, new investment is,

I = 70 - 40 = 30

Output	Consumption	Investment	Government Expenditure	Exports	Imports	NGDP NGDP=C+I+G+(NX-IM)
100	70	30	30	30	20	140
200	160	30	30	30	20	230
300	250	30	30	30	20	320
400	340	30	30	30	20	410
500	430	30	30	30	20	500
600	520	30	30	30	20	590
700	610	30	30	30	20	680
800	700	30	30	30	20	770
900	790	30	30	30	20	860
1000	880	30	30	30	20	950

The graphical illustration is given in the following figure,

1000 Numeric GDP -900 NGDP, when I = 30 -800 -700 600 -5001 -400 -300 -200 -100 Output 1100 100 200 300 400 500 600 700 800 900 1000 1200