Question

Use the following to answer questions 29-33: Expenditures HINH INI. 200 400 600 300 1000 National Income 29. Refer to the above graph to answer this question. What is the value of autonomous expenditures? A) S100. B) $200. C) $300. D) Cannot be determined 30. Refer to the above graph to answer this question. What is the value of the marginal leakage rate? A) 0.2. B) 0.5. C) 2. D) 2.5. 31 Refer to the above graph to answer this question. What is the value of the multiplier? A) 2. B) 2.5. C) 5. D) 10. 32. Refer to the above graph to answer this question. What is the value of total leakages at equilibrium? A) $200. B) $300. C) $600. D) Cannot be determined. 33. Refer to the above graph to answer this question. If autonomous taxes were to increase, what would be the result? A) The AE curve would shift up parallel and the equilibrium level of income would increase B) The AE curve would shift up parallel and the equilibrium level of income would decrease The AE curve would shift down parallel and the equilibrium level of income would increase The AE curve would shift down parallel and the equilibrium level of income would decrease. C) Use the following to answer questions 34-35: C =800+ 0.8Y X-500 -0.24 1 - 1200 G-2000 34. Refer to the information above to answer this question. What is the equation for aggregate expenditures? A) AE = 4500. D) AE = 4500 +0.6. B) AE 35000. E) AE = 11250+ 0.6Y. C) AE = 4500 +Y,

Answer 1

Answer 29:

Option C. The autonomous expenditure is the expenditure when the level of income is equal to zero which is equal to 300.

Answer 30:

Marginal leakage rate is the marginal propensity to save. The marginal propensity to consume is 0.5 which is given by the slope of the aggregate expenditure curve. Thus, MPS = 1 - MPC = 0.5. (Option B).

Answer 31:

Multiplier = 1 / MPS = 1/ 0.5 = 2.Thus, Option A is correct.

Answer 32:

Use the following to answer questions 29-33: Expenditures 100 0 200 400 600 800 1000 National Income 29. Refer to the above graph to answer this question. What is the value of autonomous expenditures? A) S100. B) $200. C) $300. D) Cannot be determined 30. Refer to the above graph to answer this question. What is the value of the marginal leakage rate? A) 0.2. B) 0.5. C) 2. D) 2.5. 31 Refer to the above graph to answer this question. What is the value of the multiplier? A) 2. B) 2.5. C) 5. D) 10. 32. Refer to the above graph to answer this question. What is the value of total leakages at equilibrium? A) $200. B) $300. C) $600. D) Cannot be determined. 33. Refer to the above graph to answer this question. If autonomous taxes were to increase, what would be the result? A) The AE curve would shift up parallel and the equilibrium level of income would increase B) The AE curve would shift up parallel and the equilibrium level of income would decrease The AE curve would shift down parallel and the equilibrium level of income would increase The AE curve would shift down parallel and the equilibrium level of income would decrease. C) Use the following to answer questions 34-35: C =800+ 0.8Y X-500 -0.24 1 - 1200 G-2000 34. Refer to the information above to answer this question. What is the equation for aggregate expenditures? A) AE = 4500. D) AE = 4500 +0.6. B) AE 35000. E) AE = 11250+ 0.6Y. C) AE = 4500 +Y,

The equilibrium occurs at point E where Y = 600.

Option A. Savings = Income - Consumption = 600 - 100 - 0.5 * 600 = 200.

Answer 33:

Option D.Increase in taxes reduce aggregate expenditure and reduces equilibrium income level.

Answer 34:

Option D. Aggregate expenditure = C + I + G + X - M