Question 1.
AGGREGATE OUTPUT/INCOME CONSUMPTION PLANNED INVESTMENT
2000 2100 300
2500 2500 300
3000 2900 300
3500 3300 300
4000 3700 300
4500 4100 300
5000 4500 300
5500 4900 300
a. At each level of output calculate savings. At each level of output, calculate unplanned investment ( inventory change). What is likely to happen to aggregate output if the economy were producing at each of the levels indicated? What is the equilibrium level of output?
b. Over each range of income ( 2,000 to 2500, 2500 to 3000, and so on), calculate the marginal propensity to save. What is the multiplier?
c. By assuming there is no change in the level of the MPC and the MPS, and planned investment jumps by 200 and is sustained at the higher level, recompute the table. What is the new equilibrium level of Y? Is this consistent with what you compute using the multiplier?
Question 2. From 1969 to late 1970, real GNP grew by more than $40 billion and employment ( the number of jobs) grew by 1.6 million, but the unemployment rate nearly doubled, from 3.4 percent to 5.9 percent. How can that be?