..,.•..-------.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...
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