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Chapter 8

This document contains 13 questions related to key economic concepts such as the multiplier, marginal propensity to consume (MPC), marginal propensity to save (MPS), and equilibrium income. The questions require calculating values for these concepts based on information provided about consumption, savings, income, taxes, imports, and investment in various economies.

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caitlinroux5
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19 views2 pages

Chapter 8

This document contains 13 questions related to key economic concepts such as the multiplier, marginal propensity to consume (MPC), marginal propensity to save (MPS), and equilibrium income. The questions require calculating values for these concepts based on information provided about consumption, savings, income, taxes, imports, and investment in various economies.

Uploaded by

caitlinroux5
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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1. The average propensity to consume in a country is 0.

75 and the marginal


propensity to consume
is 0.8. What is the value of the multiplier?

2. An open economy with a government sector is in equilibrium. Assume the


following:

• Marginal propensity to save = 0.4


• Marginal propensity to tax = 0.2
• Marginal propensity to import = 0.2

Showing your method of working, calculate:

(a) the value of the multiplier

3. Kelly is an Economics student who recently started saving a portion of her


income. She saves 45% of her income every month.
(a) Calculate the mpc
(b) Calculate the total amount she saves pm given that she obtained
R100 000 per annual for the year 2023.

4. In a closed economy with no government, a £1 billion increase in investment


leads to a £5 billion increase in consumption. What is the value of the
marginal propensity to consume?

5. An economy has the marginal propensity to save of 0.15, marginal


propensity to tax of 0.20 and a marginal propensity to import of 0.15.

a) Calculate the size of the multiplier.

b) If the Government increases their infrastructure spending by £60m,


calculate the total increase in GDP, assuming all other things remain equal.

6. Calculate the equilibrium level of income in the economy, if C = 500 + (0.9) Y; and
Investment Expenditure = 3,000.

7. From the following data calculate the equilibrium level of national income:
Autonomous Consumption = 500
Marginal Propensity to Save = 0.2
Investment = 2,000
8. Calculate MPC from the following schedule.
Income 0 100 200 300 400
Spending 60 120 150 180 200
MPC 0.60 ( 0.30 0.30 0.2
Change s 150-120 / 180-150
/change y) 200-100 /300-200
(120-60 /
100-0)

9. The level of income in an economy increases from 30 000 to 75 000 and as


a result, the level of consumption increases from 14 000 to 40 000.Calculate
MPC
10. Calculate the value of MPS from the given table

Income 100 200 300 400 500


Savings 15 50 70 110 160

11. Complete the following table


Income 400 500 600 700
Consumption 250 320 395 465
MPC
MPS

12. The level of income in an economy increases from 20 000 to 25 000 and as
a result, the level of consumption increases by 2000.Calculate MPC
13.

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