Question

The marginal propensity to save is 0.2. equilibrium gdp will decrease by $50 billion if the aggregate expenditures schedule decreases by?

Answer 1

The marginal propensity to save is 0.2. equilibrium gdp will decrease by $50 billion if the aggregate expenditures schedule decreases by:$10 billion.

Aggregate expenditures schedule

Using this formula

Aggregate expenditures schedule=Marginal propensity to save×Equilibrium gdp

Where:

Marginal propensity to save=0.2

Equilibrium gdp=$50 billion

Let plug in the formula

Aggregate expenditures schedule=0.2×$50 billion

Aggregate expenditures schedule=$10 billion

Therefore the marginal propensity to save is 0.2. equilibrium gdp will decrease by $50 billion if the aggregate expenditures schedule decreases by:$10 billion.

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