Imagine a three-firm, three-stages-of-production economy that produces one final good: a desk. Calculate the value added at each stage of production.
Answer to relevant QuestionsWhat is the MPC? The MPS? What is the relationship between them? Why is MPC + MPS always equal to 1? Accepting Milton Friedman's permanent income hypothesis, calculate the marginal propensities to consume (MPCs) for each of the four scenarios. What happens to the level of national income when intended investment is greater than actual investment? Fill in the missing cells in the following table.
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