On the attached document, I would like the step by step process to the answers for questions 1,2,5,9...

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On the attached document, I would like the step by step process to the answers for questions 1,2,5,9 each question has a, b, c etc that I need solutions for, Thank you for your assistance.
	
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Westlandia
_~e to an increase in consumer wealth, there is a $40 billion
Incremental
Total
21i:onomousincrease in consumer spending in the economies
change
change
;:; Westlandia and Eastlandia. Assuming that the aggregate
Rounds
in GDP
in GDP
;:ice levelis constant, the interest rate is fixedin both coun-
1_ .•..-..~~~ __ ~_" •~"' . ...,.._..
1
M= $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 the
3
MP[ x MP[ x M == ? ?
=carginal propensity to consume is 0.5 in Westlandia and
4 ;>
MP[xMP[xMP[xM= ?
_.75 in Eastlandia. What do your results indicate about the
:-=iationshipbetween the size of the marginal propensity to
Total
;:::'nsumeand the multiplier?
change
(1/(1 - MPC» X tlC = ?
in GDP
~1LL~\( f-\ ~ ~,-,,'b,L- fjG..'-0
Eastlanma
Disposableincome Consumer5p~en••io
Incremental Total
Year
(millions of d~Uars) (millions of dol
change change
2003
$100 in GDP in GUP
Rounds
$180
_.._-------
2004
350
380
M == $40 billion ?
2005
300 ;>
340
MP[xM== ?
- .
2006
400
420
MP[x MP[x M= ?
?
- --- ..- - .-
2007
375 ;>
400
MP[ x MPCx MP[ x M == ?
2008
500
500
Total
a.Plot the aggregate consumption function for Eastlandi
change
b.What isthe marginal propensity to consume? What is.±I . t
in 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 of
2008,
$25 billion; the marginal propensity to consume is 2/3.
a. Ifthe marginal propensity to consume is 0.56, by how
b.Firms reduce investinent spending by $40...

David · Accepted Answer

Q1
	WESTLANDIS
	 
	 
	ROUND
	 INCREMENTAL CHANGE IN gdp
	TOTAL CHANGE IN GDP
	1
	40
	40
	2
	40*.5=20
	20
	3
	20*.5=10
	10
	4
	10*.5=5
	5
	5
	5*.5=2.5
	2.5
	TOTAL
	80
	40*(1/(1-.5))=80
	EASTLANDIS
	 
	 
	ROUND
	 INCREMENTAL CHANGE IN gdp
	TOTAL CHANGE IN GDP
	1
	40
	40
	2
	40*.75=30
	30
	3
	20*.75=15
	15
	4
	10*.75=7.5
	7.5
	5
	5*.75=3.75
	3.75
	TOTAL
	160
	40*(1/(1-.75))=160
This tells us that smaller is the MPC smaller is the multiplier.
When MPC= .5 multiplier= 1/(1-.5) = 2 , so total change in GDp = 40*2=80 
When MPC= .75 multiplier= 1/(1-.75) = 4 , so total change in GDp = 40*4=160
Q2
A.
As consumption has risen the GDP will also rise by a higher amount.

On the attached document, I would like the step by step process to the answers for questions 1,2,5,9 each question has a, b, c etc that I need solutions for, Thank you for your assistance. Document...

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