Re: JNU 2006-2002 Doubts

Posted by econ14 on May 07, 2014; 2:33pm
URL: http://discussion-forum.276.s1.nabble.com/JNU-2006-2002-Doubts-tp7588757p7588862.html

16. In a closed economy, the marginal propensity to consume halves but the level of investment remains the same. Assuming all other things do not change, at the new equilibrium, in comparison to the earlier one.
(a) Savings doubles. (b) Income halves. (c) Savings is unchanged. (d) We cannot necessarily claim any of the above.

ans...
y=c+I
Y= .8Y+ 100 (let inv. be 100)
solving y= 500
saving 100
when mpc is half.=.4
y=.4y+ 100
y= 166.67
saving = 166.67 X .6 = 100(aprox)