In a certain economy, the components of planned spending are given by: C = 500 + 0.8(Y - T) - 300r
Ip = 200 - 400r
G = 200
NX = 10
T = 150
Given the information about the economy above, which expression below gives induced expenditures?
A)[910 - 700r]
B)[790 - 700r]
C)0.8Y
D)0.2Y

Question

Quizplus · Accepted Answer

Induced expenditures are the part of spending that changes with income, represented by the marginal propensity to consume (MPC) times income, which is 0.8Y in this case.

In a Certain Economy, the Components of Planned Spending Are