not so simple multiplier... (1 Viewer)

[Wild Dan Hibiki]

hey guys i got a q for u (i think this is simple multiplier stuff):

What is the equilibrium level of income if C = 100 + 0.8Y and I = 40?
(A) 100
(B) 140
(C) 500
(D) 700

i got this from the past HSC paper and i was away when my class went over this. can someone show me how to work this out?

 

[schmackers]

hey guys i got a q for u (i think this is simple multiplier stuff):

What is the equilibrium level of income if C = 100 + 0.8Y and I = 40?
(A) 100
(B) 140
(C) 500
(D) 700

i got this from the past HSC paper and i was away when my class went over this. can someone show me how to work this out?

OK well, I think this is how you do it:

When an economy is in equilibrium, S = I, so therefore S = 40.

Since Y = C + S:
Y = 100 + 0.8Y + 40
0.2Y = 140

Therefore the equilibrium level of income is 700.

It's been awhile since i did this, so i hope it's right

 

[Wild Dan Hibiki]

yeah its right, i guess that makes sense, so u move the 0.8Y to the left and thats how u get 0.2Y yeah?

 

[ToO LaZy ^*]

yep. thats right

 

[nick1048]

OK well, I think this is how you do it:

When an economy is in equilibrium, S = I, so therefore S = 40.

Since Y = C + S:
Y = 100 + 0.8Y + 40
0.2Y = 140

Therefore the equilibrium level of income is 700.

It's been awhile since i did this, so i hope it's right

Your right... Just go back to your consumption functions in your textbook if you need any help with other problems.

 

[Wild Dan Hibiki]

hopefully i wont mess a question like this in the trials LOL

 

[Wild Dan Hibiki]

ok another problem:

C = 100 + 0.6Y and S = -100 + 0.4Y

wat is the equilibrium level of national income?

 

[Lorie]

yeah it is 700. just remember the formula is 1/MPS.

 

[Wild Dan Hibiki]

yeah it is 700. just remember the formula is 1/MPS.

how did u figure out the MPS from that?

 

[ToO LaZy ^*]

i think she was referring to your first question.

 

[Wild Dan Hibiki]

...? and how did she get it from the first q?

 

[ToO LaZy ^*]

meh. beats me.

 

[Wild Dan Hibiki]

can someone help me get an answer, im still lost with this stuff

 

[Wild Dan Hibiki]

dw i figured it out i think

 

[ToO LaZy ^*]

how?....i would also like to know

 

[rumour]

OK well, I think this is how you do it:

When an economy is in equilibrium, S = I, so therefore S = 40.

Since Y = C + S:
Y = 100 + 0.8Y + 40
0.2Y = 140

Therefore the equilibrium level of income is 700.

It's been awhile since i did this, so i hope it's right

I do it differently, just use 1/MPS

but i got 500 as my answer!!!

do you have the answer?

 

[kochou]

I don't get how you use the 1/MPS method for these kind of questions...someone care to explain?

 

[rumour]

Isn't 1/MPS the multipier??

I can't do it the other way!!

 

[ToO LaZy ^*]

i thought is was 1/1-MPC..?

 

[rumour]

Yeah, 1 - MPC=MPS!!