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a. Please explain the concept of the multiplier, including What information is required to calculate the spending multiplier b. List and explain the 3 different multipliers that we discussed. c. Explain in detail how the multiplier works to impact GDP. Be specific! Start with the injection of money into the economy and then how that affects household income and then spending via the mpc. Go on to discuss the rounds of spending, etc. and how the ultimate impact on gdp is amplified by the multiplier effect.

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a. Please explain the concept of the multiplier, including What information is required to calculate the spending multiplier

b. List and explain the 3 different multipliers that we discussed.

c. Explain in detail how the multiplier works to impact GDP. Be specific! Start with the injection of money into the economy and then how that affects household income and then spending via the mpc. Go on to discuss the rounds of spending, etc. and how the ultimate impact on gdp is amplified by the multiplier effect. 

 

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  • a) The accompanying table shows gross domestic product (GDP), disposable income (YD), consumer spending (C), and planned investment spending (I-planned) in an economy. Assume there is no government or foreign sector in this economy. Complete the table by calculating planned aggregate spending (AE-planned) and unplanned inventory investment (I-unplanned) b) What is the aggregate consumption function? c) What is Y*, income-expenditure equilibrium GDP? d) What is the value of the multiplier? e) If planned investment spending falls to $200 billion, what will be the new Y*? f) If autonomous consumer spending rises to $200 billion, what will be the new Y*?
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