Question

NAME SECTION THE BASIC KEYNESIAN MODEL Use the information in the table below to fill in blanks 1-10. Disposable Income Consumption Spending $100 $200 $300 $400 $500 S600 $700 $100 $180 $260 $340 420 S500 S580 S660 1. Autonomous consumption is equal to S 2. The marginal propensity to consume is equal to 3. A S100 increase in disposable income (Yo) leads to aln) S 4. The marginal propensity to save is equal to increase in _ consumption spending (C). 5. A$100 increase in YD leads to a S increase in saving. 6. At disposable income equal to $300, saving is equal to S 7. Break-even disposable income is at disposable income equal to S 8. The algebraic form of this consumption function is 9. At disposable income equal to $1,000, consumption spending is equal to S 10. At disposable income equal to S1,000, saving is equal to S 155 Chapter 8 Assignments

Answer 1

1.

$100

It is the consumption at Y = 0

2.

Constant Change in Y = 100

Constant change in C = 80

MPC = Change in C / Change in Y

MPC = 80/100

MPC = 0.8

3.

0.8 x 100 = $80 increase in C

4.

MPS = 1-MPC = 1-0.8 = 0.2

5.

0.2 x 100 = $20 increase in C

6.

When Y = 300, C = 340

S = Y-C = 300-340 = -$40

7.

Breakeven disposable income occurs when Y = C

This occurs when Y = 500

8.

Y = 100+0.8C

9.

When Y = 1000,

Substitute in the given equation,

1000 = 100+0.8C

900 = 0.8C

C = 1125

10.

S = Y-C

S = 1000-1125

S = -125