Question: I. Use the numbers in the table below to answer the following. All gures are in billions of dollars. D1 = disposable income, C 2

I. Use the numbers in the table below to answer the following. All gures are in billions of dollars. D1 = disposable income, C 2 consumption spending, S = saving, I 2 investment spending, AE = aggregate expenditure I I IplannedI m _ c , s ; l . m 2000 I 2200 ' ' | 2300 I 2900 I I I I 3500 I 3500 I I I l 4493 I 4300 ' 5200 I soon . soon I 5700 I 5300 6400 A. Calculate the saving column. B. Caiculate the marginal propensity to consume. C. Calculate the marginal propensity to save. D. Suppose that at the current rate of interest, business rms plan to invest $300 billion. Fill in the investment and aggregate expenditure columns. E. Determine the equilibrium level of income. F. Calculate the multiplier. G. Suppose an increase in interest rates induces business firms to decrease their investment spending to $200 billion. Determine the resulting change in equilibrium disposable income. Show your work. H. Suppose now that businesspersons become more optimistic and increase their investment spending to $350 billion. Determine the resulting change in equilibrium disposable income. Show your work. II. Use the graph below to answer the following. All figures are in billions of dollars. DI = disposable income, C = consumption, AE = aggregate expenditure, GDP = gross domestic product C, AE, GDP -GDP -AE 2250- C 2200- 2150 - 2100 2100 2150 2200 2250 2300 DI A. Calculate the marginal propensity to consume. B. Calculate the marginal propensity to save. C. Determine the equilibrium level of income. D. Calculate the multiplier. E. Suppose a decrease in interest rates induces business firms to increase their investment spending by $10 billion. Show the effect of this increase on the AE curve and determine the resulting change in equilibrium disposable income. Show your work. III. The Multiplier A. If the marginal propensity to consume is 0.9, what is the multiplier? B. If the multiplier is 7, what is the marginal propensity to consume? C. If the marginal propensity to save is 0.6, what is the multiplier? D. If the multiplier is 20, what is the marginal propensity to save

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