Question

new house duction in n the new equipment - between national income will fall and they will end up saving no more than they were initially. Use the model and diagrams of this chapter to show how an (autono- mous) increase in desired saving would reduce equilib- rium income and lead to no change in actual aggregate saving. In the simple model of this chapter, aggregate invest- ment was assumed to be autonomous with respect to national income. The simple multiplier was 1/(1 - 2), where z was the marginal propensity to spend. And with autonomous investment, the marginal propensity to spend is simply the marginal propensity to consume. But now suppose firms' investment is not com- pletely autonomous. That is, suppose that I = I + BY, where I is autonomous investment and B is the "mar- ginal propensity to invest" (B > 0). Explain how this modification to the simple model changes the simple multiplier, and why. lesired or desired Explain equally nent in 45°-line unction I PROBLEMS Consider the following table showing aggregate con- sumption expenditures and disposable income. All val- ues are expressed in billions of constant dollars. E = Y
question 7, can you also explain it very thoroughly how you got the answer and the steps to get the answer such as step 1, 2, 3 that would be much appreicated thank you very much.

Answer 1

Multipliei : It is the shange in Income due to change in Autonomous exp. we know at eq" Y = AE Y= ctithe Y = c + 2 y + I + ã Y- 2y = c + Itā Y = Autonomous exp 1- 2 Thus diffh worto A.E Aut. Exp = But when I = I BY Then Y=cAlta = c + 2y + I + By tā Y-24 - BY = c + I tă YZ X EtI t 1-2- Ano Exp. = 1-2-B 1-2-B Simple multiplici - 1 It will denease ble some amon of Income get lakered at Investment is leakage