Determine the table below when answering the following questions. The marginal propensity to save is constant at all levels of real GDP, and investment spending is autonomous for the hypothetical economy. There is no government.
Real GDP Consumption Saving Investment
$2000 2200 600 400
4000 4000 400 400
6000 5800 200 400
8000 7600 0 400
10,000 9400 -200 400
12,000 11,200 -400 400
1. Calculate the equilibrium real GDP without investment? Determine the multiplier effect from the inclusion of investment?
2. Determine the average propensity to consume at equilibrium real GDP?
3. What happens to equilibrium real GDP if autonomous investment declines from $400 to $200?