Table 11.1

-Refer to Table 11.1. If the marginal propensity to import increases to 0.5 (mpi = 0.5), what is the new equilibrium level of output?

Name: Table 11.1 -Refer to Table 11.1. If the marginal propensity to import increases to 0.5 (mpi = 0.5), what is the new equilibrium level of output?
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Question

Table 11.1
 
-Refer to Table 11.1. If the marginal propensity to import increases to 0.5 (mpi = 0.5), what is the new equilibrium level of output?

Quizplus · Accepted Answer

The initial equilibrium level of output is 800.00, as seen in the Table.
With mpi = 0.5, the multiplier becomes 2 instead of 4. Therefore:

New equilibrium level of output = 800.00/(1-0.8+0.5) = 946.67

Table 11.1 -Refer to Table 11.1. If the Marginal Propensity to Import