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]
- 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
- 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?
- 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)?
- 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 |
- What is the equilibrium level of GDP in the income-expenditure model?
- Suppose that there is a decrease in Exports by $20. What is the new equilibrium level of GDP in the income-expenditure model?
- What is the difference between the original and new GDP as a result of a decrease in Exports?
- 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.