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Comparing Economic Stimulus Effects
Imagine an economy where autonomous consumption is 50, investment is 50, and the marginal propensity to consume is 0.5. A policymaker wants to increase the equilibrium output. Which of the following two policy changes would have a larger impact on the equilibrium output: (A) a 20-unit increase in investment, or (B) an increase in the marginal propensity to consume from 0.5 to 0.6? Justify your answer with calculations for both scenarios.
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Consider a simplified model of an economy where total demand is the sum of consumption and investment. The consumption function is given by C = 100 + 0.8Y, where C is consumption and Y is total income. Initially, planned investment (I) is 50. If planned investment increases to 70, what is the new equilibrium level of output (Y)?
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In an economy where the marginal propensity to consume is 0.8, a ā¬20 billion increase in autonomous investment will lead to a ā¬20 billion increase in the equilibrium level of output.
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In a closed economy with no government sector, the equilibrium level of output is ā¬500 billion. If autonomous consumption is ā¬40 billion and the marginal propensity to consume is 0.75, what must the level of planned investment be to achieve this equilibrium?
Comparing Economic Stimulus Effects
Econland's Equilibrium Output Calculation
In a simplified closed economy, the equilibrium level of output (income) is ā¬1,000 billion. Autonomous consumption is ā¬50 billion, and planned investment is ā¬150 billion. Based on this information, what is the marginal propensity to consume?
In a closed economy without a government, autonomous consumption is ā¬200 billion, planned investment is ā¬100 billion, and the marginal propensity to consume is 0.7. The equilibrium level of output for this economy is ā¬____ billion.