Question

Figure 13-4 $15,00o 13,500 Aggregabe expendi tures curve 9,000 5 7,500 6,0o0 4,500 ,000 1,500 O $3,000 6,000 9,000 12,000 15,000 Real GDP (>per year фі11 ions of dollars> Let γ. real GDP, C-Consumption Suppose Y-co-c, Y What is the value of autonomous C0 Where autonomous consumption is consumption when income o Question 5 0 out of 1 points See slide #1 from class to answer the following question: (slides) During recession of 2008-2009 we see durable goods fall faster than non-durable goods. What might explain this Question 6 0 out of 1 points Suppose Co increases from 3,000 to 4,000. using the above graph for the previous two problems. How much does GDP increase Question Completion Status: O $3,000 6,000 9,000 12,000 15,000 Real GDP Cper year billions of dellars> Let γ-real GDP, C-Consumption Suppose Y-co-cry what is the value of autonomous co Where autonomous consumption is consumption when income 0 $1,500 billion $3,000 billion $4,500 billion $6,000 billion QUESTION6 Suppose Co increases from 3,000 to 4,000. using the above graph for the previous two problems. How much does GDP increase O $1,000 $1,000*multiplier = $2,000 $1,000/multiplier $500 $4,000

Answer 1

When the income is zero the consumption is 3000. it is given that the autonomous consumption is the one which is found at an income level of zero. Therefore autonomous consumption is $3000. Select 3000 billion

The marginal propensity to consume in this case is 0.5 because when income is increased from 0 to 6000, consumption is increased from 3000 to 6000. Therefore MPC is 3000 / 6000 or 0.5. the multiplier is therefore 1/1-0.5 or 2. Now consumption is increased from 3000 to 4000. Income will increase by 1000 x multiplier or 1000 x 2 which gives 2000. Select second option for question 6.