Aggregate Expenditure Multiplier Chapter 14 ANSWERS TO CHAPTER CHECKPOINTS ■ Study Plan Problems a6
s
8
T
10
U
12
V Find the value of Q, K, S, Tf Uf and V. Q = ; R = ; S = ; T = ; U= ; V = . All of the answers are calculated using the formula AE = C + I+G + X -M. Calculate the marginal propensity to consume and the marginal propen sity to import. What is equilibrium expenditure? The marginal propensity to consume equals the change in consumption expenditure divided by the change in disposable income. Because taxes are constant, the change in real GDP equals the change in disposable in come. When real GDP increases from $4 million to $6 million, consump tion expenditure increases from $ million to $ million. MPC equals the change in consumption, $ million, divided by the change in real GDP, $ million, which is . The marginal propensity to import equals the change in imports divided by the change in real GDP. When real GDP increase from $4 million to $6 million, imports increase from $ million to $ million. The marginal propensity to import equals the change in imports, $ million, divided by the change in real GDP, $ million, which is . Equilibrium expenditure is $10 million because this is
