In economics, the multiplier effect refers to the fact that when there is an injection of money to consumers, the consumers spend a certain percentage of it. That amount recirculates through the economy and adds additional income, which comes back to the consumers and of which they spend the same percentage. This process repeats indefinitely, circulating additional money through the economy. Suppose that in order to stimulate the economy, the government institutes a tax cut of $8 billion. If taxpayers are known to save 7% of any additional money they receive, and to spend 93%, how much total money (T) will be circulated through the economy by that single $10 billion tax cut?

Q: If consumers decided to save a higher percentage of their disposable income, the value of the…

A: The spending multiplier, or monetary multiplier, is a financial proportion of the impact that an…

Q: MPC = .75   What is the value of the multiplier?

A: MPC=0.75 MPS=1-0.75         =0.25

Q: Consider a hypothetical economy in which households spend $0.50 of each additional dollar they earn…

A: Given,   Household spending = $0.50 each additional dollar  Household save = $0.50 each additional…

Q: If taxpayers are known to save 7% of any additional money they receive, and to spend 93%, how much…

A: I am answering this according to a $10 tax cut as you have mentioned both $8 and $10 in the…

Q: Suppose the MPC is .6 and consumption increases by $8 billion. Consequently, total income through…

A: Given information, Change in consumption: $8 billion (increase) MPC: 0.6 Find: change in total…

Q: The Federal Reserve was very worried about deflation in early 2009, which would raise real interest…

A: When the autonomous value of aggregate expenditure function changes, the concept of the spending…

Q: the multiplier coefficient is 5, by what amount does real GDP output have to increase or decrease in…

A: Aggregate expenditure is sum of consumption spending, investment spending, government purchases and…

Q: Which of the following statements is correct?  a) From an additional dollar of income the least…

A: Disposable income can be defined as the income available to the consumers after paying the taxes and…

Q: Suppose that an initial $10 billion increase in investment spending expands GDP by $10 billion in…

A: The spending multiplier is given by 1/(1-mpc). a) marginal propensity to consume is the ratio of…

Q: If the multiplier is 5, then the MPC is Answer 0.05 0.5 0.6 0.8   Question 43 In a certain economy,…

A: Hello. Since you have posted multiple questions and not specified which question needs to be…

Q: Consider a hypothetical economy in which households spend $0.50 of each additional dollar they earn…

A: Given The hypothetical economy in which households spend $0.50 of each additional dollar they earn…

Q: The Finance Minister in Canada asked a policy analyst the following question "what value can the…

A: Multiplier refers to the economic factor that when changed cause change in the many other related…

Q: roup of answer choices As marginal propensity to consume (b) decreases, the spending multiplier…

A: Change in consumption following change in income is called marginal propensity to consumer.

Q: Consider a hypothetical economy in which households spend $0.80 of each additional dollar they earn…

A: According to the given information, MPC (marginal propensity to consume) is 0.8 and MPS (marginal…

Q: The multiplier process can occur when a decrease in investment spending...

A: The multiplier process explains the vicious circle formed by the economic transaction.

Q: According to the multiplier concept when there is a change in any one of the components of total…

A: Multiplier is the process by which a change in autonomous expenditure leads to change in income by…

Q: Consider a hypothetical economy in which households spend $0.75 of each additional dollar they earn…

A: In financial matters, a cash multiplier is one of different firmly related proportions of business…

Q: When the economy is in a recession, the government will want to increase output. If the multiplier…

A: Please find the answer below.

Q: Using the appropriate formulas and an MPC of 0.85, calculate the multipliers for each of the two…

A: Multiplier effect An economic concept known as the multiplier effect describes the proportional…

Q: In a closed economy (i.e. without exports and imports), the marginal propensity to save increases…

A: MPS and MPC follows certain relation MPS+MPC=1 MPS=1-MPC MPC=1-MPS

Q: A tax rebate that returns a certain amount of money to taxpayers can have a total effect on the…

A: Amount = $2000 spending = 70 %

Q: Explain in technical details why the Lagrange multiplier is currently used in analyzing the theory…

A: In economics, the Lagrange function is used to address optimization issues.

Q: 600 600 500 150 650 -50 700 700 575 150 725 -25 800 800 650 150 800 900 900 725 150 875 25 1,000…

A: (f). we already have autonomous consumption of $50 and MPC is 0.75. Initially planned expenditure is…

Q: Describe the phenomenon of the multiplier effect?

A: The multiplier effect is the phenomenon of proportional change in a variable (such as income) due to…

Q: If the ratio of MPS and MPC is 1:4 then find the value of multiplier.

A: The concept of an investment multiplier states that every increase in public or private investment…

Q: What is a multiplier? How does the multiplier effect occur? Please provide examples of at least…

A: The term multiplier is a widely used term in macroeconomics. It measures the amount by which…

Q: The multiplier effect demonstrates that:

A: Multiplier effect is one of the macroeconomic concept.

Q: In economics, the multiplier effect refers to the fact that when there is an injection of money to…

A: Given, The initial amount = $8 billion Taxpayer save = 11% Spend = 89%                   That is,…

Q: The multiplier (expenditure multiplier) is the ratio between which two measures? marginal propensity…

A: Multiplier: - it is a fraction that shows the magnitude of the change in national income due to a…

Q: Show that if the multiplier is one, the slope of the savings schedule is one.

A: Multiplier really intends that with expansion in speculation there is ordinarily expansion in pay.

Q: What would be the value of Marginal propensity to save when the multiplier is given as 7.9

A: Given: Multiplier = 7.9 To find: The value of MPS.

Q: MPS is 0.10 B) MPC is 0.90 C) Multiplier is 10 D) All of the above

A: MPS is referred to Marginal Propensity to Save. It is the part of each extra dollar($) of income(Y)…

Q: If a $568 increase in investment spending increases income by $568 in the first round of the…

A: here we calculate the increase in income by using the given information so calculation as follow-

Q: The simple multiplier is:  a) consumption spending divided by saving.  b) one divided by one minus…

A: The simple multiplier is used to determine how much an initial change in aggregate demand affects…

Q: Illustrate how changes in investment (or other components of total spending) can increase or…

A: Multiplier – Multiplier means that a change in economic factor leads to a change in another economic…

Q: Answer the following questions: Instructions: In part a, round your answers to 2 decimal places. In…

A: In an economy, the value of multiplier can be computed in two ways, such that: =1/(1-MPC) And,…

Q: Which one of the following statements relating to marginal propensity to consume is INCORRECT?…

A: Marginal propensity to consume is defined as the proportion of an aggregate raise in pay that a…

Q: Suppose that the following information describes the economy of Wonderland: C = 300 + 0.8Yd I = 300…

A: In an open economy, when talking about multiplier, one need to know that: mps+mpc+mpm+mpt=1 Where,…

Q: The following graph shows the total expenditure line (TE) for an economy where current equilibrium…

A: Real GDP (350) is less than potential GDP (600), so there is a contractionary gap. To close the gap,…

Q: True or False? Explain: The multiplier effect is likely to be greatest when the government spending…

A: The multiplier effect is likely to be greatest when the government spending is targeted at the…

Q: What is the multiplier effect? The multiplier is simply the ratio of the change in ( r G_ ) to the…

A: NOTE: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question…

Q: Consider a hypothetical economy in which households spend $0.80 of each additional dollar they earn…

A: Expenditure multiplier (M) is the ratio between the change in the real GDP & the change in the…

Q: Equity multiplier ratio : 2015: 1.66x 2016: 1.88x 2017: 1.94x 2018: 1.90x 2018: 1.74x What is the…

A: The Equity Multiplier is determined by dividing a company's net assets by its total equity. This…

Q: Scenario 34-1. Take the following information as given for a small, imaginary economy:   • When…

A: To find multiplier, we need to know the marginal propensity to consume i.e MPC. Marginal propensity…

Q: What will be the impact on the spending multiplier if the marginal propensity to save (MPS)…

A: Marginal propensity to save (MPS) is the ability to save the increased income instead of spending on…

Q: If a $2000 increase in income leads to an $1600 increase in consumption expenditures, then the…

A: consumer income is split in two parts MPC and MPS here we calculate the following as follow-

Q: The multiplier process depicted in the following table is based on an MPC of 0.75. a. Recompute the…

A: Given, OPTION-1- MPC= 0.75 OPTION-2-MPC=0.95

Q: Which best describes why the multiplier exists? When people spend money, that money ends up in the…

A: Multiplier is an economic term which shows that an input widens the effect of other variables.

Q: In economics, the multiplier effect refers to the fact that when there is an injection of money to…

A: Given: Tax cut=$8 billion Saving=17% Spending=83%