Income Consumption. I(planned) Aggregate Exp Inventory . change. I(actual) 100 9
ID: 1231501 • Letter: I
Question
Income Consumption. I(planned) Aggregate Exp Inventory . change. I(actual)
100 90 50 .
200 170 50 .
300 250 50 .
400 330 50 .
500 410 50 .
600 490 50 .
700 570 50 .
800 650 50
1. Complete the table by supplying the figures for aggregate expenditure,, the change in inventory, and actual investment. Remember that the change in the inventory is the difference between income/output and aggregate expenditure.
2. The equilibrium level of income is _______________.
3. The level of inventory change at Y= 800 is ___________.
4, The marginal propensity to consume is ___________.
5. Actual investment exceeds planned investment for all levels of income above ________.
Explanation / Answer
Q1) Income = Y AE = C + I Change in inventory = Y - (C+I) Actual I = I planned + inventory change AE, Change in inventory, Actual I are in the following order 140, -40, 50 220, -20, 150 300, 0, 250 380, 20, 350 460, 40, 450 540, 60, 550 620, 80, 650 700, 100, 750 Q2) Equilibrium is established where inventory change is 0 at income = 300 Q3) Level of inventory change at Income = 800 is 100 from table in Q1 Q4) MPC = change in consumption/Change in income from the table for every 100 increase in Y, consumption increases by 80 MPC = 80/100 = 0.8 Q5) Till Y = 300 inventory change is -ve. So actual I is less than Planned I at Y =300 I actual = I planned above Y = 300 I actual exceeds I planned