Answer to Question #92134 in Macroeconomics for Zwivhuya

Question

Consider the following numerical example of the simple Keynesian model with no government spending, taxes or a foreign sector (all figures in R millions):
C = 100 + 0,9Y
I = 50
Answer the following questions.

What is the value of the marginal propensity to consume (MPC) in this model? [2]
Use a graph to illustrate the equilibrium level of output. [5]
Calculate the equilibrium level of output.[5]
In equilibrium, what is the value of consumption spending? Use this number to verify that the sum of C and I in equilibrium equals the value for equilibrium output you obtained [2]above.
What is the value of the multiplier in this economy?[1]
Suppose the level of output that creates full employment in the economy is 1 800. Using the multiplier, determine the level of investment spending that would create full employment in this economy.[3]

Answer 1

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