1.) Kerry received a rise in salary from £23,000 to £27,000 during the year due to promotion. Her savings increased from £5,000 to £7,000 per year at the same time. Calculate her MPC.
2.) If aggregate demand is increased by £600,000 and the MPC is 0.45. Find the original change in AD.
3.) If aggregate demand increased by £7.98bn and the MPC is 0.6, find the change in GDP.
4.) Find the multiplier if a £425,000 decrease in investment expenditure resulted in a £2million decrease in real GDP.
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- Thread Starter
- 28-01-2017 13:54
- 28-01-2017 18:05
1) Her increase in income is 27000-23000 = 4000, and consumption is given as income - savings. So her change in consumption is (27000-7000) - (23000-5000) = 20000 - 18000 = 2000. So when her income increase by 4000, her consumption increase by 2000. Plug those numbers into the equation of MPC. 2000 / 4000 = 0.5. Her MPC is 0.5