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.