1 / 9

Analyzing Income-Expenditure Model in a Recession - Calculating Propensity to Consume and More

Explore the Income-Expenditure Model during a recession scenario by determining marginal propensities, plotting functions, calculating equilibrium GDP, multiplier effects, and analyzing changes with increased investment. Fully explained with real-dollar examples.

rasha
Télécharger la présentation

Analyzing Income-Expenditure Model in a Recession - Calculating Propensity to Consume and More

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Income-Expenditure Model

  2. 2001 recession

  3. Great Recession

  4. Question 1 Determine the marginal propensity to consume and the marginal propensity to save.

  5. Question 2 Given: (all real dollars) Autonomous consumption spending =$250 billion Planned investment spending = $350 billion The marginal propensity to consume = 2/3

  6. Question 2 • Plot the consumption function and aggregate expenditures • What is the value of Y* (equilibrium GDP)? • What is unplanned inventory investment when real GDP = $600 billion? • What is the value of the multiplier? • If planned investment increases to $450 billion, what is the new value of Y*?

  7. Question 2 • What is Y* (equilibrium GDP)? Y*=$1,800 billion • What is unplanned inventory investment when real GDP = $600 billion? Iunplanned = -$400 billion • What is the value of the multiplier? Multiplier=3.0 • If planned investment increases to $450 billion, what is the new value of Y*? Y** = $2,100 billion

More Related