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?