Final answer:
The MPC is 0.8, indicating that 80% of additional income will be consumed. 'G' is exogenously determined and 'Y' cannot be determined without additional data. Taxes decrease consumption by reducing disposable income.
Step-by-step explanation:
The student's question involves the Keynesian Cross model, specifically the consumption function represented by C = 120 + 0.8(Y - T), and how it relates to the national income and equilibrium.
A. Marginal Propensity to Consume (MPC)
The marginal propensity to consume (MPC) in the given consumption function can be identified as the coefficient of Y (after-tax income), which is 0.8. This shows that for every additional dollar of disposable income (income after taxes), consumption will increase by 80 cents.
B. Government Spending (G)
Government spending (G) is typically represented as an exogenous variable in the Keynesian Cross model, hence it is determined by factors outside this model and is not directly calculable from the information provided.
C. Equilibrium Level of National Income (Y)
To determine the equilibrium level of national income (Y), we need information on aggregate spending components and their relationships. In equilibrium, aggregate spending (C + I + G + X - M) equals national income (Y). Without specific values for investment (I), government spending (G), exports (X), and imports (M), we cannot determine Y.
D. Impact of Taxes (T) on Consumption
The impact of taxes (T) on consumption is illustrated by the reduction in disposable income. With a consumption function like C = 120 + 0.8(Y - T), an increase in taxes reduces the disposable income, therefore reducing consumption by the amount of MPC × tax increase.