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If income increase from 2500 to 3900,and autonomous investment increase by 350,the MPC should be how much.?
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If income increase from 2500 to 3900,and autonomous investment increas...
Calculation of MPC


To calculate the MPC (marginal propensity to consume) in this scenario, we need to use the formula:

MPC = Change in consumption / Change in income

Calculating Change in Income


The change in income is the difference between the new income and the old income:

Change in income = New income - Old income
Change in income = 3900 - 2500
Change in income = 1400

Calculating Change in Consumption


To calculate the change in consumption, we need to first find the initial level of consumption and the new level of consumption:

Initial consumption = Old income - Autonomous investment
Initial consumption = 2500 - 0
Initial consumption = 2500

New consumption = New income - Autonomous investment
New consumption = 3900 - 350
New consumption = 3550

Change in consumption = New consumption - Initial consumption
Change in consumption = 3550 - 2500
Change in consumption = 1050

Calculating the MPC


Now that we have the change in consumption and the change in income, we can calculate the MPC:

MPC = Change in consumption / Change in income
MPC = 1050 / 1400
MPC = 0.75

Therefore, the MPC in this scenario is 0.75. This means that for every $1 increase in income, consumption will increase by $0.75.
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If income increase from 2500 to 3900,and autonomous investment increas...
Your Answer

{ MPC = 0.75}


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Read the report given below and answer the questions that follow:When, at a particular price level, aggregate demand for final goods equals aggregate supply of final goods, the final goods or product market reaches its equilibrium. Aggregate demand for final goods consists of ex-ante consumption, ex-ante investment, government spending, etc. The rate of increase in ex-ante consumption due to a unit increment in income is called marginal propensity to consume. For simplicity we assume a constant final goods price and constant rate of interest over short run to determine the level of aggregate demand for final goods in the economy. We also assume that the aggregate supply is perfectly elastic at this price. Under such circumstances, aggregate output is determined solely by the level of aggregate demand. This is known as effective demand principle. An increase (decreas e) in autonomous spending causes aggregate output of final goods to increase (decrease) by a larger amount through the multiplier process.What is the circumstance when aggregate output is determined solely by the level of aggregate demand called?

Read the report given below and answer the questions that follow:When, at a particular price level, aggregate demand for final goods equals aggregate supply of final goods, the final goods or product market reaches its equilibrium. Aggregate demand for final goods consists of ex-ante consumption, ex-ante investment, government spending, etc. The rate of increase in ex-ante consumption due to a unit increment in income is called marginal propensity to consume. For simplicity we assume a constant final goods price and constant rate of interest over short run to determine the level of aggregate demand for final goods in the economy. We also assume that the aggregate supply is perfectly elastic at this price. Under such circumstances, aggregate output is determined solely by the level of aggregate demand. This is known as effective demand principle. An increase (decreas e) in autonomous spending causes aggregate output of final goods to increase (decrease) by a larger amount through the multiplier process.The rate of increase in __________________ due to a unit increment in income is called marginal propensity to consume.

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If income increase from 2500 to 3900,and autonomous investment increase by 350,the MPC should be how much.?
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