Name: Andrew Avanzado Professor:Violy T.

Jumawid
Year & Section: BPA 3B Rating:

Exercise 2
Problem:

a. Compute the MPC and multiplier.

b. What is the equilibrium income and consumption?
c. How come that multiplying the initial value of consumption by the multiplier
coefficient results in the same value as in the foregoing?
d. Construct a new consumption schedule now assuming that MPC is equal to 0.90.
e. What is the new equilibrium income?
Exercise 3: Fill in the blanks. Indicate if each of the following increases or decreases the
consumption level.

1. Increase in disposable income

2. Increase in interest rates
3. Effective advertising program
4. Decrease in population growth
5. Credit availability
6. Expectation of price increases
7. Expectations of income increases
8. Increase in tax rates
9. Increase in family income
10. Improved income distribution

Exercise 4:
Given the income and consumption levels, complete the following table:

Income Consumption Savings APC APS

4,000 4,000
5,000 4,800
6,000 5, 600
7,000 6,400
8,000 7,200
9,000 8,000
10,000 8,8000
Income MPC (.75) MPS 9.25)
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000