Answer to Question #269952 in Macroeconomics for Anna

Question

Birdland has autonomous consumption of 600. Additional data for Birdland:

mpc = 0.70

net taxes = 50

government purchases = 100

planned investment = 100

net exports = 40

Given all of this information, induced expenditures = _____:

 

A. 0.70Y.

B. 990 + 0.30Y.

C. 0.80Y.

D. 805 + 0.70Y.

Answer 1

Solution:

The correct answer is A. 0.70Y

 

AE = a + bY

Induced expenditure = bY

b = MPC = 0.70

Y = National Income

Induced Expenditure = 0.70Y