assume that the mps in an economy is equal to 0.33. the multiplier must be equal to 3.03. you have…

assume that the mps in an economy is equal to 0.33. the multiplier must be equal to 3.03. you have established that the multiplier is 3.03. now assume that autonomous real consumption is $4 trillion. there is no other autonomous spending presently taking place in the economy. at what level is consumption equal to real gdp? $12.12 trillion. (round your answer to two decimal places) you have established that the multiplier is 3.03 and that autonomous real consumption is $4 trillion. there is autonomous investment of $2 trillion and autonomous net exports of $8 trillion. at what level are expenditures equal to real gdp? $ trillion. (round your answer to two decimal places)

assume that the mps in an economy is equal to 0.33. the multiplier must be equal to 3.03. you have established that the multiplier is 3.03. now assume that autonomous real consumption is $4 trillion. there is no other autonomous spending presently taking place in the economy. at what level is consumption equal to real gdp? $12.12 trillion. (round your answer to two decimal places) you have established that the multiplier is 3.03 and that autonomous real consumption is $4 trillion. there is autonomous investment of $2 trillion and autonomous net exports of $8 trillion. at what level are expenditures equal to real gdp? $ trillion. (round your answer to two decimal places)

Answer

Explanation:

Step1: Recall the consumption - GDP formula

The formula for equilibrium GDP in a simple Keynesian model with no government and no foreign sector (in the case of only consumption and investment) is $Y=\frac{a + I}{1 - MPC}$, where $Y$ is GDP, $a$ is autonomous consumption, $I$ is investment, and $MPC$ is the marginal propensity to consume. Also, the multiplier $k=\frac{1}{1 - MPC}=\frac{1}{MPS}$. Given $k = 3.03$.

Step2: First, find equilibrium GDP with autonomous spending components

The autonomous spending $A=a + I+NX$. Here, $a = 4$ trillion, $I = 2$ trillion, $NX=2$ trillion, so $A=4 + 2+2=8$ trillion. Since $k=\frac{1}{1 - MPC}=3.03$, then $1 - MPC=\frac{1}{3.03}\approx0.33$. The equilibrium GDP $Y = k\times A$. Substitute $k = 3.03$ and $A = 8$ trillion into the formula: $Y=3.03\times8 = 24.24$ trillion.

Step3: Then, find GDP when only autonomous consumption is considered

When there is only autonomous consumption $a = 4$ trillion and no other autonomous spending ($I = 0$, $NX = 0$), using $Y=k\times a$. Substitute $k = 3.03$ and $a = 4$ trillion into the formula: $Y=3.03\times4=12.12$ trillion.

Answer:

  1. When autonomous consumption is $4$ trillion, autonomous investment is $2$ trillion and autonomous net - exports is $2$ trillion, the equilibrium GDP is $24.24$ trillion.
  2. When there is only autonomous consumption of $4$ trillion and no other autonomous spending, the equilibrium GDP is $12.12$ trillion.