On the attached document, I would like the step by step process to the answers for questions 1,2,5,9 each question has a, b, c etc that I need solutions for, Thank you for your assistance. Document...

On the attached document, I would like the step by step process to the answers for questions 1,2,5,9 each question has a, b, c etc that I need solutions for, Thank you for your assistance.
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..,.•..-------.Westlandia_~e to an increase in consumer wealth, there is a \$40 billionIncrementalTotal21i:onomousincrease in consumer spending in the economieschangechange;:; Westlandia and Eastlandia. Assuming that the aggregateRoundsin GDPin GDP;:ice levelis constant, the interest rate is fixedin both coun-1_ .•..-..~~~ __ ~_" •~"' . ...,.._..1M= \$40 billion:25, and there are no taxes and no foreign trade, complete ?2'~e accompanying tables to show the various rounds of ?MPCxM== ?:::creased spending that will occur in both economies if the3MP[ x MP[ x M == ? ?=carginal propensity to consume is 0.5 in Westlandia and4 ;>MP[xMP[xMP[xM= ?_.75 in Eastlandia. What do your results indicate about the:-=iationshipbetween the size of the marginal propensity toTotal;:::'nsumeand the multiplier?change(1/(1 - MPC» X tlC = ?in GDP~1LL~\( f-\\ ~ ~,-,,'b,L- fjG..'-0EastlanmaDisposableincome Consumer5p~en••ioIncremental TotalYear(millions of d~Uars) (millions of dolchange change2003\$100 in GDP in GUPRounds\$180_.._-------2004350380M == \$40 billion ?2005300 ;>340MP[xM== ?- .2006400420MP[x MP[x M= ??- --- ..- - .-2007375 ;>400MP[ x MPCx MP[ x M == ?2008500500Totala.Plot the aggregate consumption function for Eastlandichangeb.What isthe marginal propensity to consume? What is.±I . tin GDP (1/(1 - MPC» x tlC = ?marginal propensity to save?2. Assuming that the aggregate price levelis constant, the inter-c.What isthe aggregate consumption function?est rate is fixed, and there are no taxes and no foreign trade,-------5. The Bureau of Economic Analysis reported that overall ~what willbethe change in GDP ifthe following events occur?sumer spending decreased by \$102,8 billion during October _a.There is an autonomous increase in consumer spending of2008,\$25 billion; the marginal propensity to consume is 2/3.a. Ifthe marginal propensity to consume is 0.56, by howb.Firms reduce investinent spending by \$40...

Solution

David answered on Dec 20 2021
Q1
WESTLANDIS

ROUND
INCREMENTAL CHANGE IN gdp
TOTAL CHANGE IN GDP
1
40
40
2
40*.5=20
20
3
20*.5=10
10
4
10*.5=5
5
5
5*.5=2.5
2.5
TOTAL
80
40*(1/(1-.5))=80
EASTLANDIS

ROUND
INCREMENTAL CHANGE IN gdp
TOTAL CHANGE IN GDP
1
40
40
2
40*.75=30
30
3
20*.75=15
15
4
10*.75=7.5
7.5
5
5*.75=3.75
3.75
TOTAL
160
40*(1/(1-.75))=160
This tells us that smaller is the MPC smaller is the multiplier.
When MPC= .5 multiplier= 1/(1-.5) = 2 , so total change in GDp = 40*2=80
When MPC= .75 multiplier= 1/(1-.75) = 4 , so total change in GDp = 40*4=160
Q2
A.
As consumption has risen the GDP will also rise by a higher amount. This amount is given by the spending/consumption multiplier= m= 1/(1-MPC) = 1/(1-2/3)= 3
m= change in GDP/ change in C
change in C= +25 billion
so change in GDp = 25*3 = a RISE of 75...
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