Answer to Question #129526 in Macroeconomics for Claydon

Question

The information below relates to a closed economy without a government. Use the information to

answer the questions that follow:

• Autonomous consumption = R285 million;
• Autonomous investment = R300 million;
• Marginal propensity to consume = 0.4.

Q.4.1 Calculate the level of autonomous spending. (3)
Q.4.2 Calculate the size of the multiplier. (3)
Q.4.3 Calculate the equilibrium level of income. (2)
Q.4.4 Suppose that the equilibrium level of income is 1 000 and it is below the fullemployment level of income of 1200.
Calculate the change in investment spending required to reach full employment.
(3)
Q.4.5 Discussthe relationship between total income and total spending in the
macroeconomy according to Say’s law.

Answer 1

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