Analyzing the effect of change in MPC on aggregate expenditure

Suppose MPC is 0.8 initially. Households then change their behavior so that the MPC falls to 0.75. What happens to aggregate expenditures? Why?

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MPC represents the fraction of additional income that is used for consumption expenditures. Higher value of MPC means that people will spend more of every additional dollar they earn. Lower value of MPC indicates that the ...

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Solution discusses the impact of changes in MPC on aggregate expenditure.

In theaggregateexpenditure model, assume that the consumption function is given by C = 800 + 0.58(Y - TP), that planned investment (I) equals 250, and that government purchases (G) and taxes (TP) each equal 200. Assume that there is no import or export spending. If G is now 300, calculate the equilibrium level of income (to 3

A government is currently operating with an annual budget deficit of $40 billion. The government has determined that:
--The marginal propensity to consume is 0.75.
--To eliminate an inflationary gap and take into account the resulting change in the price level, the government must generate a net leftward shift in the aggrega

Explain the difference between expansionary monetary policy and contractionary monetary policy.
also,
Suppose when income is $10,000, aggregateexpenditures are also $10,000. If income were hypothetically $0, aggregateexpenditures would be $2,500.
a. At an income of $10,000, what are induced expenditures?
b. At an inc

Does anybody want to illustrate Monetary Policy using the following example:
Let's say the Fed Reserve decreases interest rates by 5% (which they did recently over a period of 2 years). Manufacturers who used to offer 4% financing now are willing to do it for 0%. This causes aggregate demand for cars to increase by 100 Million,

A. Suppose that the economy starts at equilibrium and thempc= 0.75. What would be theeffect of a $300 increase in government spending once all the rounds of the multiplier process are complete?
b. suppose that the economy starts at equilibrium and thempc = 0.8.
What would be theeffect of a 300 increase in taxes onc

An increase in the price level will
a. shift theaggregateexpenditure function upward
b. shift theaggregateexpenditure function downward
c. result in a movement upward along theaggregateexpenditure function
d. result in a movement downward along theaggregateexpenditure function
e. changethe slope of theaggregate ex

Suppose that economists observe that in a closed economy an increase in government spending of $10 billion raises the total demand for goods and services by $30 billion.
* If these economists ignore the possibility of crowding out, what would they estimate the marginal propensity to consume (MPC) to be?
* Now suppose that th

Assuming that theaggregate price level is constant, the interest rate is fixed, and there are no taxes on foreign trade, how much will theaggregate demand curve shift and in what direction if the following events occur?
A. An autonomous increase in consumer spending of $25 billion; the marginal propensity to consume is 2/