ECN360 week 6 homework

2-2. Consider the table below when answering thefollowing questions. For this hypothetical economy,the marginal propensity to save is constant atall levels of real GDP, and investment spendingis autonomous. There is no government. (Seepages 253263.)Real GDP$ 2,0004,0006,0008,00010,00012,000Consumption$2,2004,000________________________Saving$_______________________________Investment$400______________________________a. Complete the table. What is the marginal propensity to save? What is the marginal propensity to consume?b. Draw a graph of the consumption function. Then add the investment function to obtain C + I.c. Under the graph of C + I, draw another graph showing the saving and investment curves. Notethat the C + I curve crosses the 45-degree reference line in the upper graph at the same levelof real GDP where the saving and investment curves cross in the lower graph. (If not, redraw your graphs.) What is this level of real GDP?d. What is the numerical value of the multiplier?e. What is equilibrium real GDP without investment? What is the multiplier effect from the inclusion of investment?f. What is the average propensity to consume at equilibrium real GDP?12-4. Calculate the multiplier for the following cases.(See page 267.)a. MPS = 0.25b. MPC = 5/6c. MPS = 0.125d. MPC = 6/712-6. The marginal propensity to consume is equal to 0.80. An increase in household wealth causes autonomous consumption to rise by $10 billion.By how much will equilibrium real GDP increase at the current price level, other things being equal? (See page 267.)12-12. Consider the diagram below, which applies to a nation with no government spending, taxes, and net exports. Use the information in the diagramto answer the following questions, and explain your answers. (See pages 253263.)