2003 MC Question (1 Viewer)

[Ekman]

Hey everyone, this is from the 2003 HSC question

Q8:
What is the equilibrium level of income if C=100+0.8Y and I=40
a)100
b)140
c)500
d)700

Can someone explain how to do this question, and why we might need I=40

Thanks!

 

[photastic]

hey everyone, this is from the 2003 hsc question

q8:
What is the equilibrium level of income if c=100+0.8y and i=40
a)100
b)140
c)500
d)700

can someone explain how to do this question, and why we might need i=40

thanks!

y = c + i
y = 100 + 0.8y + 40
0.2y = 140
y = 140/0.2 = 700

 

[Ekman]

y = c + i
y = 100 + 0.8y + 40
0.2y = 140
y = 140/0.2 = 700

Thanks for clarifying, I didn't know that y=c+i

 

[photastic]

Thanks for clarifying, I didn't know that y=c+i

Tim Riley has a 10/10 explanation on this, but I dont think it will be tested due to the amended syllabus change in 2010.

wait

how is it that you can just change from 0.8y to 0.2y in your working

Chuck the 0.8y over to the left hand side. 1y - 0.8y = 0.2y (m8 math).

 

[Ekman]

Tim Riley has a 10/10 explanation on this, but I dont think it will be tested due to the amended syllabus change in 2010.

Wait but in the 2011 HSC exam, how would you do Q13:
Year 1: C=110 Y=150
Year 2: C=200 Y=300
What is the new equilibrium level of income in Year 3 if the investment increases by 40

a)360
b)367
c)400
d)420

 

[photastic]

Wait but in the 2011 HSC exam, how would you do Q13:
Year 1: C=110 Y=150
Year 2: C=200 Y=300
What is the new equilibrium level of income in Year 3 if the investment increases by 40

a)360
b)367
c)400
d)420

You use the multiplier and/or MPC rather than Y = C + I I believe, not entirely sure.

 

[hawkrider]

Chuck the 0.8y over to the left hand side. 1y - 0.8y = 0.2y (m8 math).

oh derp, i did not see that

thankies ^__^

 

[Ekman]

You use the multiplier rather than Y = C + I I believe.

Is the multiplier just (change of income)/(change of consumption)

Edit:
And what is your change in AD. Is it just Previous Year Consumption + Change in investment?

 

[photastic]

Is the multiplier just (change of income)/(change of consumption)

k = 1/1-MPC or 1/MPS

So going back that 2011 HSC Question,

MPC = ΔC/ΔY = 90/150 =0.6
k = 1/1-MPC = 1/1-0.6 = 2.5
Therefore, New equilibrium income = Previous equilibrium income + k x ΔI = 300 + 2.5 x 40 = 400

 

[Ekman]

k = 1/1-MPC or 1/MPS

I don't exactly remember how to calculate MPC or MPS, is there a specific formula?

 

[photastic]

I don't exactly remember how to calculate MPC or MPS, is there a specific formula?

Solution above, MPC = ΔC/ΔY and MPS = ΔS/ΔY

 

[Ekman]

Solution above, MPC = ΔC/ΔY and MPS = ΔS/ΔY

Ok thanks for clarifying that up!