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The following table is a consumption schedule
The following table is a consumption schedule. Assume that taxes and transfer payments are zero and that all saving is personal saving.(GDP = DI) C S APC APS 1500 $1540 $_______ 1.027 -.027 1600 1620 _______ 1.013 -.013 1700 1700 _______ _____ _____ 1800 1780 _______ .989 .011 1900 1860 _______ .979 .021 2000 1940 _______ _____ _____ 2100 2020 _______ .962 .038 2200 2100 _______ _____ _____Compute saving at each level of disposable income and the missing average propensities to consume and to save.What is the break-even level of disposable income?What is the MPC, the MPS?What is the value of the multiplier in this example? What does it represent? How can it be used?
Expert Solution
The value of the multiplier represents the change in aggregate income resulting from a one-dollar change in autonomous expenditures.
Multiplier is important in understanding the actual impact on the aggregate income and output of an economy when government spending or tax rate changes.
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