Read the problems carefully, and ATTACH YOUR SOLUTIONS. BOX YOUR FINAL ANSWERS.

National Income Determination

1a). Assume that Ye1 = 2500, given MPC = 0. 60, (a) find the marginal propensity to save (MPS).

1b). Given the MPC = 0.60 in (1a), find the spending multiplier.

1c). Given the spending multiplier in (1b), find the change in the change in the equilibrium level of income due to the change in investment equal to 700?

1d). Given the old income of Ye1 = 2500, and the change in income in (1c), what is Ye2?

2a). Given the same MPC = 0.60 in Problem 1, find the change in equilibrium level of income when the government spending increases by 2000

2b). If we start from Ye2 in Problem 1 and given the change in equilibrium income due to change in government spending, what is the new equilibrium level of income (Ye3).

3a). Given the same MPC =0.60 in Problem 1, find the change in equilibrium level of income when exports increased by 400 but the imports increased by 100,

3b). If we start from Ye3 in Problem 2, and given the change in equilibrium income due to change in net exports in (3a), what is the new equilibrium level of income (Ye4)?

4a) Given the same MPC= 0.60 in Problem (1a) find the change in equilibrium level of income when the lump-sum tax increased by 2000.

4b) If we consider the simultaneous increase in government spending and lump-sum taxation by 2000 each, as given in the previous problems, how much is the change in the equilibrium income attributed to the balanced increase in G and T?