Suppose that you are given the following information on the components of aggreg

Question

Suppose that you are given the following information on the components of aggregate spending in South Africa. The symbols Y, C,I,G,x and Z represent income; consumption spending investment spending; government spending, exports and imports respectively. Use the information to answer questions 3.19 to 3.23 Year 15 15 60 110 170 230 60 60 100 2 50 45 400 60 60 5 350 410 75 3.19. Autonomous aggregate spending is equal to. [1 670 2] 2100 [3] 215 [4] 245 3.20. The marginal propensity to consume is equal to [1 0.6 [2] 0.5 13] 0.1 [4] 0.4 3.21. The multiplier is equal to... 1] 4 5 [3] 2.5 [4] 2 3.22. Aggregate spending in year 5 is equal to. [1 600 [2] 525 [3] 445 [4] 350 3.23. Comparing aggregate spending with equilibrium income, what is happening to production in year 2? [1] Production is likely to increase [2] Production is likely to decrease [3] Production will remain unchanged [4] Production is equal to aggregate spending

Explanation / Answer

3.19 Option 3.

It is at the point where Y = zero

3.20 Option 1 Change in C/Change in Y

3.21 Option 3

formula = 1/(1-mpc) = 1/(1-0.6) = 2,5

3.22 Option 3

3.23 Option 1 as it is increasing

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