If the level of autonomous spending is $6000 billion, the marginal propensity to expend is .4, and the level of national income is $12000, planned expenditures would be equal to
A) $10800 billion and inventory accumulation would equal $1200 billion.
B) $13200 billion and inventory accumulation would equal -$1200 billion.
C) $10800 billion and inventory accumulation would equal -$1200 billion.
D) $13200 billion and inventory accumulation would equal $1200 billion.

Question

Quizplus · Accepted Answer

Planned expenditures can be calculated using the formula: $PE = A + mpc(Y)$, where $A$ is autonomous spending, $mpc$ is the marginal propensity to consume (or expend in this context), and $Y$ is the level of national income. Substituting the given values: $PE = 6000 + 0.4(12000) = 6000 + 4800 = 10800$ billion. Inventory accumulation is the difference between national income and planned expenditures, which is $12000 - 10800 = 1200$ billion.

If the Level of Autonomous Spending Is $6000 Billion, the Marginal