Compute equilibrium income, autonomous spending, multiplier.
1. What will happen to equilibrium income in the following cases?
a. The mpe is 0.8 and autonomous consumption decline $200. Income will decline $1000
b. The mpe is 0.5 and taxes raise $400. (The mpc is also 0.5.) Income will decline $400
2. Autonomous consumption is 200, autonomous investment is 100, autonomous government spending is 50, autonomous exports are 100, and autonomous imports are 70. The mpe is 0.6.
1.What is autonomous spending?
2.What is the multiplier?
3.What is equilibrium income?
4.What would happen to equilibrium income if the mpe rose to 0.8? It would rise to $1900.