You are given the following information about a closed economy with no government: Consumption = 445 + 0.75Y Investment = 250 Use the above information to answer the questions that follow: Q.4.1 Calculate the value of autonomous spending. (2) Q.4.2 Calculate the value of the multiplier. (3) Q.4.3 Calculate the equilibrium level of income. (3) Q.4.4 Clearly explain the characteristics of the consumption function. (6) Q.4.5 What is the main determinant of the level of investment

You are given the following information about a closed economy with no government: Consumption = 445 + 0.75Y Investment = 250 Use the above information to answer the questions that follow: Q.4.1 Calculate the value of autonomous spending. (2) Q.4.2 Calculate the value of the multiplier. (3) Q.4.3 Calculate the equilibrium level of income. (3) Q.4.4 Clearly explain the characteristics of the consumption function. (6) Q.4.5 What is the main determinant of the level of investment

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 4TY

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The consumption function for a closed economy with no government sector is given by the equation: C = £200 million + 0.8 Y where C is aggregate consumption and Y is national income. (i) Calculate the value of aggregate savings if the level of national income is £4000 million. (ii) Calculate the equilibrium level of national income if the level of planned investment is £600 million. (ii) Calculate the level of aggregate consumption at the equilibrium level of national income if the level of planned investment is £1000 million. Calculate the change in national income if planned investment rose from £600 (iv) million to £800 million.
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