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National income and expenditure components

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The national income and expenditure components for each level of the economy of Lala Land are given below.

What is the total expenditure at each level of income?

What is the equilibrium level of GDP?

What is the marginal propensity to consume?

Using the multiplier, if consumer spending autonomously increases by $200, what is the new equilibrium level of GDP?


$9600 6400 1600 2200 800 1200
10000 6700
10400 7000
10800 7300
11200 7600
11600 7900

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Solution Summary

Given data on national income and the components of expenditure, this solution shows how to calculate the equilibrium GDP, Marginal Propensity to Consume (MPC) and spending multiplier. It then uses a spreadsheet to show how equilibrium GDP changes if consumer spending increases.

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