Answer the questions on the basis of the following information for a mixed econo

ID: 1176808 • Letter: A

Question

Answer the questions on the basis of the following information for a mixed economy:

C = 25 + .75 (Y-T)

I = 50

Xn = 10

G = 70

T = 30

a. What is the mpc and mps for this economy?

b. What is the multiplier for this economy?

c. What is the equilibrium output?

2. Given the following for the economy of a country:

Consumption function: C = 85 + 0.8Yd

Investment function: I = 100

Government Spending: G = 100

Net Taxes: T = -40 + 0.25Y

Disposible income: Yd = Y - T

Equilibrium: Y = C + I + G

What is the marginal propensity to consume?

What is the expenditure multiplier?

What is the equilibrium output?

a. What is the mpc and mps for this economy?

a) MPC = Slope of graph of C v/s y = 0.75

MPS = 1- MPC = 0.25

b. What is the multiplier for this economy?

b) 1/MPS = Multiplier = 1/0.25 = 4

c. What is the equilibrium output?

Y = C+ I +G +Xn

Y = 25 +0.75*(Y - 30) + 50 + 10 +70

0.25*Y = 132.5

Y = 530

a)MPC = 0.8

b) MPS = 1-0.8 = 0.2

K = 1/MPS = 1/0.2 =5

c) Y = C + I +G = 85 +0.8*(Y + 40-0.25*Y) +100 +100

Y = 0.6*Y + 317

Y = 528.33

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