Supplemental Exercises: Chapter 4

Supplemental Exercises: Chapter 10

1. Fill in the blanks in the following table.

2. Assuming investment is autonomous; draw an investment function with income on the horizontal axis. Show how the function shifts if: a) The interest rate rises b) An investment tax is applied c) The new President is expected to advocate anti-business policies d) The economy is at almost full capacity

3. Use the following table to answer these questions:

a) What is the MPC? b) What is the MPS? c) What is the MPI? d) What is the level of aggregate expenditures at each level of income? e) Graph the aggregate expenditures function.

4. Based on the table in the prior exercise, what is the linear equation for each of the following functions? a) Consumption b) Investment c) Net Exports d) Aggregate Expenditures

5. What is the level of savings if: a) Disposable income is $1500 and consumption is $1100. b) Disposable income is $1900 and APS is 0.3. c) MPC=0.8, disposable income has gone from $500 to $750, savings was originally $80.

6. What is the MPC if: a) Consumption increases by $100 when disposable income increases by $200. b) Consumption decreases by $60 when disposable income decreases by $150. c) Saving equals $75 when disposable income equals $150, and saving equals $100 when disposable income equals $350.

7. Draw a diagram and illustrate the effects of the following on the U.S. net export function if the a) Australian government restricts imports of goods from the US. b) US national Income decreases. c) Foreign Income increases. d) The US dollar appreciates on the FX market

8. Suppose the consumption function is C=$450+0.7Y a) What is the amount of autonomous consumption? b) What is the MPC? c) What would consumption equal when real GDP equals $2000?