2. Consider a simple economy as follows: INCOME (Y) 3,000 4,000 5,000 6,000 7,000 CONSUMPTION(C) INVESTMENT(I)...

 

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2. Consider a simple economy as follows: INCOME (Y) 3,000 4,000 5,000 6,000 7,000 CONSUMPTION(C) INVESTMENT(I) 2,300 1,600 3,000 1,600 3,700 1,600 4,400 1,600 5,100 1,600 All the figures are in billions of dollars. Assume that autonomous consumption is 200. (a) Calculate the marginal propensity to consume out of total income. Show your work. (b) Write down the equation that describes the consumption function for this economy. Note that the answer is not C = a + bY. (c) Calculate the total autonomous expenditure. Show your work. (d) Calculate the equilibrium level of income. Show your work. (e) Calculate the spending multiplier. Show your work. (f) On the basis of the above answers, calculate the new equilibrium level of income as a result of a $100 billion dollars increase in autonomous consumption. Show your work. 2. Consider a simple economy as follows: INCOME (Y) 3,000 4,000 5,000 6,000 7,000 CONSUMPTION(C) INVESTMENT(I) 2,300 1,600 3,000 1,600 3,700 1,600 4,400 1,600 5,100 1,600 All the figures are in billions of dollars. Assume that autonomous consumption is 200. (a) Calculate the marginal propensity to consume out of total income. Show your work. (b) Write down the equation that describes the consumption function for this economy. Note that the answer is not C = a + bY. (c) Calculate the total autonomous expenditure. Show your work. (d) Calculate the equilibrium level of income. Show your work. (e) Calculate the spending multiplier. Show your work. (f) On the basis of the above answers, calculate the new equilibrium level of income as a result of a $100 billion dollars increase in autonomous consumption. Show your work.