Question

In Econland autonomous consumption equals 700, the marginal propensity to consume equals 0.80, net taxes are fixed at 50, planned investment is fixed at 100, government purchases are fixed at 100, and net exports are fixed at 40. The slope of the Expenditure Line is:A) 0.2B) 0.8C) 0.9D) 0.99

Answer 1

Answer:

B) 0.8

Explanation:

C = 700 + 0.80(Y-T)

I = 100

G = 100

NX = 40

T = 50

Substitute into the function below

EA = C + I + G + NX

700 + 0.80(Y-50) + 100 + 100 + 40

=700 + 0.80Y - 40 + 100 + 100 + 40

ADD LIKE TERMS TOGETHER

Therefore,

EA = 900 + 0.80Y

Econland Autonomous Expenditure Line is the vertical intercept of 900

that is, 0.80