Consider the following table. For this hypothetical economy, the marginal propensity to save is constant at all levels of real GDP, and investment spending is autonomous. Equilibrium real GDP is equal to $8,000. There is no government.

You need to:

1. Complete the table.

2. Calculate the marginal propensity to save.

3. Calculate the marginal propensity to consume.

4. Draw a graph of the consumption function using the Graphed. Then, add the investment function to obtain C+I

5. Draw another graph showing the saving and investment curves under the C+I graph. What is the level of real GDP?

Transcribed Image Text:

Real GDP (S) 2,000 4,000 6,000 8,000 10,000 12,000 Consumption (S) 2,000 3,600 5,200 6,800 8,400 10,000 Saving (S) Real GDP (S) 2,000 4,000 6,000 8,000 10,000 12,000 Consumption (S) 2,000 3,600 5,200 6,800 8,400 10,000 Saving (S)

Answer rating: 100% (QA)

1 Compete the Table Real GDP Consumption Saving Investment 2000 2000 0 1200 ... View the full answer