Problem (1) C = Y Consumption Function I = 100 Investment

Slides:

Advertisements

Similar presentations

Aggregate Expenditures: The multiplier Chapter 10 Part 2 of Unit 5.

Advertisements

Income and Expenditures Equilibrium. 2 Equilibrium Real GDP: mpc =.7, mpi =.1 (1) Real GDP (Y) (2) Consumption (C) (3) Investment (I) (4) Gov’t Spending.

Intermediate Macroeconomics Chapter 5 The Keynesian Model.

1 Chapter 6 Consumption & Investment 6/10/ GDP = C + I + G + ( X – M) GDP = C + I + G GDP = C + I.

Aggregate Demand - Aggregate Supply Equilibrium. The Fixed-Price Keynesian Model: An Economy Below Full – Employment Focus on the Demand Side.

Aggregate Expenditure

Keynesian Economics According to John Maynard Keynes: in the short-run, the level of GDP is determined primarily by demand.

Spending and Output in the Short Run Chapter 13. Chapter 13 Learning Objectives. You should be able to: List the components of investment. Distinguish.

Spending and Output in the Short Run Chapter 13. Chapter 13 Learning Objectives. You should be able to: List the components of investment. Distinguish.

Consumption & Savings MPC & MPS.

The Demand for Goods Total Demand. The Demand for Goods C = c 0 + c 1 Y D Consumption (C)

The Nation’s Marginal Propensity to Consume

Chapter Twenty Four Aggregate Expenditure and Equilibrium Output.

Learning Objectives: Aggregate Expenditures LO1: Understand the marginal propensity to consume and how consumption, saving, and investment relate to national.

Module Income and Expenditure

Income and Expenditure. As people earn more income, they spend more, but also save more In percentage terms, people with higher incomes spend less and.

Marginal Propensity to Consume ● Measures the ratio of the change in consumption to the change in disposable income that produces the change in consumption.

Mr. Mayer AP Macroeconomics Consumption & Saving.

Learning Objectives: Aggregate Expenditures LO1: Understand the marginal propensity to consume and how consumption, saving, and investment relate to national.

Income-Expenditure Model recession Great Recession.

Hard to tell if it is going in or coming out! 1.Draw a graph, labeling Qe, Qf, AS, AD and Pe, that shows an inflationary GDP gap (2 pts) (label the gap,

Problem (1) C = Y Consumption Function I = 100 Investment

Learning Objectives: Aggregate Expenditures LO4: See how government’s budget balance and the balance of trade both relate to national income LO5: Understand.

Aggregate Expenditures

 Definition  Calculating the value of multiplier  Importance of multiplier  Uses of multiplier  Limitations of multiplier  Mathematics.

Learning Objectives: Aggregate Expenditures LO1: Understand the marginal propensity to consume and how consumption, saving, and investment relate to national.

MPC = Change in Consumption Change in Income Marginal Propensity to Consume = MPC MPC = 750 / 1000 = 0.75 “Disposable income” Real terms MPC does not equal.

Eco 200 – Principles of Macroeconomics Chapter 10:Aggregate Expenditures.

Topic 3: Fiscal Policy Circular Flow Investment Taxes and Government Spending 1.

AP Economics Mr. Bernstein Module 16: Income and Expenditure February 2016.

Macroeconomics National Income – a Simple Equilibrium Model 1.

 Disposable is your net income Your save or spend that income  Marginal Propensity to Consume (MPC) Is the increase in consumer spending when disposable.

Student-Centered Learning. Module Income and Expenditure 16.

29/9 Aggregate Demand & Aggregate Supply. STICKY PRICES AND THEIR MACROECONOMIC CONSEQUENCES Short-run in macroeconomics The period of time in which prices.

Chapter 13 – Private Sector Components of Aggregate Demand Read pages I Determining the Level of Consumption A)Consumption and Disposable Personal.

9 9 Demand-Side Equilibrium: Unemployment or Inflation? A definite ratio, to be called the Multiplier, can be established between income and investment.

Aggregate Demand Macroeconomics 2. Aggregate Demand Economy without government and foreign trade: AD = C + I Economy with government and without foreign.

Saving and investment academic year 2015/16 Introduction to Economics Augusto Ninni 1.

The Multipliers Homework

The Income-Expenditure Model

Alphabet Soup and Economics

Basic Macroeconomic Relationships

A Basic Model of the Determination of GDP in the Short Term Chapter 16

Chapter 11 The Output Multiplier © OnlineTexts.com p. 1.

Warm-Up Why did boom towns rise in the Old West?

Income and Expenditure

Mr. Rupp AP Macroeconomics

Marginal Propensity to Consume

Multiplier Definition Calculating the value of multiplier

National Income Determination Two-Sector National Income Model

INCOME, INTEREST RATES, POLICY, AND THE OPEN ECONOMY

28 EXPENDITURE MULTIPLIERS C l i c k e r Q u e s t i o n s.

Aggregate Demand.

National Income Determination Two-Sector National Income Model

A Simple Model of Income Determination

Basic Macroeconomic Relationships

Basic Macro Relationships

Fiscal Policy Related Formulas:

Mini Quiz Which of the following is the formula for Aggregate Expenditures? a. ΔY/ΔI b. C + I + G + NX c. 1/(1-MPC) d. ΔC/ΔDI (multiplier) (multiplier)

INCOME, INTEREST RATES, POLICY, AND THE OPEN ECONOMY

Mr. Mayer AP Macroeconomics

Introduction to the Keynesian System

Consumption, Saving, MPC, MPS, Multipliers

Multiplier Effect.

4/8/2019 Chapter 9- MPC and MPS Objective – Students will be able to answer questions regarding the marginal propensity to consume (MPC) and the marginal.

Discussions The MPC is A) the change in consumption divided by the change in income. B) consumption divided by income. C) the change in consumption divided.

National Income Determination Two-Sector National Income Model

Introduction: The Aggregate Expenditure Model

Basic Macroeconomic Relationships

Building the Aggregate Expenditures Model

Presentation transcript:

Problem (1) C = 20 + 0.8 Y Consumption Function I = 100 Investment Find the following: 1. Marginal Propensity to Consume (MPC): MPC = 0.8 2. Marginal Propensity to Save (MPS): MPC + MPS =1 MPS = 1 – MPC = 1 – 0.8 = 0.2

C = 20 + 0.8 Y Consumption Function I = 100 Investment 3.The Equilibrium Domestic income (Y): Y = C + I Y = 20 + 0.8 Y + 100 Y – 0.8 Y = 120 (1- 0.8) Y = 120 0.2 Y = 120 Y = 120/0.2 = 600 4. Autonomous Consumption ( ): = 20 5. Induced Consumption (MPC)Y): = 0.8 * 600 = 480

6. Consumption at Equilibrium (C): C = 20 + 0.8 Y Consumption Function I = 100 Investment 6. Consumption at Equilibrium (C): C = Autonomous Consumption + Induced Consumption C = 20 + 480 = 500 7. Saving at Equilibrium (S): S = Y – C = 600 – 500 = 100 S = I

8- show the equilibrium Y graphically? S AND I S n 100 I 600 Y

Problem (2) C = 10 + 0.7 Y I = 50 Find the Following: 1. Marginal Propensity to Consume (MPC) MPC = 0.7 2. Marginal Propensity to Save (MPS) MPC = 1 – MPC = 1 - 0.7 = 0.3 3. Autonomous Consumption ( ) = 10 4. Y at equilibrium Y = C + I Y = 10 + 0.7 Y + 50 Y – 0.7 Y = 10 + 50 (1 – 0.7 ) Y = 60 0.3 Y = 60 Y = 60 / 0.3 = 200

C = 10 + 0.7 Y I = 50 5. Induced Consumption = MPC * Y = 0.7 * 200 = 140 6. Total Consumption = Autonomous Consumption + Induced C. = 10 + 140 = 150 7. Total Saving S = Y- C S = 200 – 150 = 50 S= I = 50

8- show the equilibrium Y graphically? S & I S n 50 I 200 Y

Problem (3) Problem (4) C = 50 + 0.6 Y Find Saving Function Solution S = - 50 + 0.4 Y Problem (4) S = - 50 + 0.2 Y Find Consumption Function Solution C = 50 + 0.8 Y ________________________

Problem (5)