MACRO ECONOMICS EXERCISE

CHAPTER 9

Given the following information about a hypothetical economy, complete the table below.  Graph the consumption function. (Include a 45 degree line and indicate the level of equilibrium GDP)

Assume Gross Private Domestic Investment “I” = \$160

GDP=DI                 C                S                  I                 Aggregate Demand

800                         840         ____          ______              ________

900                         920        ____          ______              ________

1500                  1400       _____         ______             _________

1800                   1640         _____         ______            __________

2000                   1800        _____         _______          __________

2400                  2120       _____          ______            __________

Plot the 45 degree line and the Consumption Function.

Break Even is at \$ _________

Numerically, given only C + I = AD in the economy, the Macro Economic Equilibrium is at \$ ________

Given this information, calculate the MPC and MPS

MPC = ________

MPS = _________