Module 10 Assignment: Problem Set — The Income-Expenditure Model

You can click on the following link to download the problem set for this module: The Income-Expenditure Problem Set.

The Income-Expenditure Model Problem Set[1]

  1. Consider the following information in the table below.
Income (Y) Consumption (C) Savings (S)
1000 950 50
1100 1040 60
1200 1130 70
1300 1220 80

Given this data the consumption function can be written as:

C = _____ + _____ Y 

  1. Consider the following information for Slovenia.
Category Amount
Autonomous Consumption 250
MPC 0.9
Tax Rate 0.25
Investment 800
Government Expenditure 100
Exports 20
MPI 0.05

What is the equilibrium level of GDP in the income-expenditure model?

  1. Consider the following information in the table below.
Income (Y) Imports (M)
1000 200
1100 220
1200 240
1300 260

Given this data, what is Marginal Propensity to Import (MPI)?

 

  1. Suppose that the level of income is $1000 and the tax rate is 0.1 %.

Given this data, what is the level of disposable income?

 

Use the following information to answer questions 5 through 8:

Consider the following information for Slovenia.

Category Amount
Autonomous Consumption 430
MPC 0.9
Tax Rate 0.25
Investment 800
Government Expenditure 100
Exports 20
MPI 0.05

 

  1. What is the equilibrium level of GDP in the income-expenditure model?

 

  1. Suppose that there is a decrease in Exports by $20. What is the new equilibrium level of GDP in the income-expenditure model?

 

  1. What is the difference between the original and new GDP as a result of a decrease in Exports?

 

  1. Suppose that MPC is equal to 0.8. What is the spending multiplier?

 

 

[1] This assignment by Lumen Learning is licensed under a Creative Commons Attribution 4.0 International License. You can access an alternative means to plotting points at https://www.desmos.com/calculator.

You can click on the following link to download the problem set for this module: The Income-Expenditure Problem Set.