Answer to Question #92310 in Macroeconomics for Unknown287159

Question

Consider the following numerical example of the 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 question.
1. What is the value of the marginal prosperity to consume (MPC) in this model? (2 marks)
2. Use a graph to illustrate the equilibrium level of output. (5 marks)
3. Calculate the equilibrium level of output. (5 marks )
4. In equilibrium ,what is the value of consumption spending?use this number to verify that the sum of C and I in equilbrium equals the value for equilbrium output you obtained above(2 marks)
5. What is the value of the. Multiplier in this economy?(1 mark)
6. Suppose the level of output that creates full employment in the economy is 1800. Using the multiplier,determine the level of investment spending that would create full employment in the economy. (3 marks)

Answer 1

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