Question

Hi, I need some help with these. Thanks!

C S $ AD $100 $ 160 GDP $100 200 300 400 500 600 700 I $80 80 80 80 220 280 340 80 400 80 460 80 Complete the columns on S, and AD. (7 marks) The MPC is and the MPS is (4 marks) At $600 billion level of GDP, the APC is and APS is (4 marks) 4. If both government spending and taxes are zero, the equilibrium level of GDP is (2 marks) 5. If government now spends $80 billion at each level of GDP and taxes remain at zero, the multiplier will be and equilibrium GDP will be (5 marks) 6. If in addition to government spending $80 billion at each level of GDP, government imposes a lump-sum tax of $100, the tax multiplier will be , and the equilibrium GDP will now be (5 marks)

Answer 1

GDP	C	S = GDP - C	I	AD = C + I
100	100	100 - 100 = 0	80	100+80 = 180
200	160	200-160 = 40	80	160+80 = 240
300	220	300-220 = 80	80	220+80 = 300
400	280	400-280 = 120	80	360
500	340	500-340 = 160	80	420
600	400	600-400 = 200	80	480
700	460	700-460 = 240	80	540

1. C+S = GDP
So, S = GDP - C
And, C+I = AD

2. MPC = Change in C/Change in GDP = (160-100)/(200-100) = 60/100 = 0.6
MPS =  Change in S/Change in GDP = (40-0)/(200-100) = 40/100 = 0.4

3. APC = C/GDP = 400/600 = 0.67
APS = S/GDP = 200/600 = 0.33

4. Equilibrium GDP = $300 as equilibrium occurs when GDP = AD. They are both equal at the level of GDP = $300.

(Note: As HOMEWORKLIB's policy, 4 subparts are to be answered at a time.)