-2
$\begingroup$

Equations for $C$, $I$, $G$, and $NX$ are given below. If the equilibrium level of $GDP$ is $\$21,500$, what is the marginal propensity to consume?

$$C = 1,500 + (MPC)\cdot Y$$ $$I = 1,000$$ $$G = 2,000$$ $$NX = -200$$

$\endgroup$
  • 1
    $\begingroup$ Please provide your tentative solution so that we can get what is not clear to you $\endgroup$ – PhDing Jun 11 '18 at 7:59
0
$\begingroup$

In equilibrium,

Y = AD ________________________ ( eq 1)

AD= C + I + G + NX

AD= 1,500 + cY + 1,000 + 2,000 - 200

Or AD = 4,300 +cY Or Y = 4,300 +cY ------(from 1)

Or (1-c)Y=4,300

Or 1-c = 4,300/Y = 4,300/21,500 = 0.2

Or 1-c = 0.2

Or c = 0.8

Hope this helps

| improve this answer | |
$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.