Problem
Suppose the Marginal Propensity to Consume (MPCD) out of disposable income is 0.8. The share of national income which is paid in taxes is 10 percent. 30 percent of national income is spent on imports. Suppose also that total autonomous expenditure, A, consists of $60b (exports), $20b (investment), $30bn (government spending), and $6b (autonomous consumption).
i. What is the marginal propensity to consume out of National Income (MPCN)? i.e. explain what it means.
ii. Calculate the equilibrium level of national income, Y* in this case (note E* = Y*)