How do we calculate the effects of real GDP on consumption ...

[darbym82]

How do we calculate the effects of real GDP on consumption expenditure and imports by using the marginal propensity to consume and the marginal propensity to import?
 
  What will be an ideal response?

Question 2

Refer to Figure 7-2. Marginal social benefit is represented by which curve?
 
  A) Supply
  B) D2
  C) D1
  D) All of the above represent marginal social benefit.

[sailorcrescent]

Answer to Question 1

The effects of real GDP on consumption expenditure and imports are determined respectively by the marginal propensity to consume and the marginal propensity to import. In particular, the effect of a change in real GDP on consumption expenditure equals the marginal propensity to consume multiplied by the change in disposable income. Similarly, the effect of a change in real GDP on imports equals the marginal propensity to import multiplied by the change in real GDP.

Answer to Question 2

B

[darbym82]

Excellent

[ryhom]

TYSM