Spending Round by RoundComplete the following questions.1. Assume the MPC is 0.75. What is the value of the multiplier? What is the MPS? Whatwould need to happen to make the multiplier larger?2. Assume investment spending increases by $20 billion and the MPC is 0.75. Calculatethe first through the fourth rounds of spending in the economy.3. Assume investment spending increases by $20 billion and the MPC is 0.75. Calculatethe total change in GDP arising from this increase in investment spending.

Multiplier and MPS:The multiplier (k) represents the ratio of the change in GDP to the initial…

Answered: Spending Round by Round Complete the…

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter19: The Keynesian Model In Action

Section: Chapter Questions

Problem 5SQP

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In order to financially stimulate the nation, the Federal government injected $900 billion dollars into the economy. However, the results were less than spectacular. One reason could have been a failure to understand the marginal propensity to consume. Assume the marginal propensity to consume (MPC) was only 0.4. How much of that $900 billion went to increased consumption? Where did the rest of the money go? Increased consumption: Where did the rest go? Using MPC = 0.4, what is the spending multiplier (the actual numerical value please): What was the overall change in income as a result of the stimulus package after the multiplier completely works its way through the economy?
Question 1: You are given the data concerning Freedonia, a legendary country i. C = 200 + 0.8Y ii. I = 100 a) What is the MPC to consume and what is the MPS? b) Solve for equilibrium income. c) Suppose I changes to 110, what is the new equilibrium level of income? By how much does a $10 increase in planned investment changes equilibrium income? What is the value of multiplier?
Suppose an economy with the following characteristics.Y = Real GDP or national incomeT = Taxes = 0.3YC = Consumption = 140 + 0.9(Y – T)I = Investment = 400G = Government spending = 800X = Exports = 600M = Imports = 0.15YGiven the information above, What is this economy’s spending multiplier?
Table 2 shows elements in the national income accounts of an economy. Assume the economy is currently in equilibrium. elements billions Consumption (total) 80 Investment 9 Government Expenditure. 6 Imports 15 Exports 8 C) If national income now rises by £22 billion and as a result, the consumption of domestically produced goods rises to £80 billion. Calculate the marginal propensity to consume (MPC). D) What is the value of the multiplier? E) Comment on the results in part (c) and (d).
Automous consumption =100m Investment spending =100m Government spending 200milion Export =150 million Automous export =100 million Marginary propensity to consume =1/3 Taxes rate is 1/10 Marginary propensity to import 1/10 YF=2150 million Questions 1.1 culculate the level of Automous spending in the country 1.2calculate the size of multiplier 1.2 calculate equilibrium level of the income
What is the multiplier effect? What relationship does the MPC bear to the size of the multiplier? The MPS? What will the multiplier be when the MPS is 0, .4, .6, and 1? What will it be when the MPC is 1, .90, .67, .50, and 0? How much of a change in GDP will result if firms increase their level of investment by $8 billion and the MPC is .80? If the MPC is .67?
What is the multiplier effect in economics? A. The tendency of consumers to save rather than spend B. The tendency of firms to reduce production during a recession C. The amplification of changes in spending through the economy D. The reduction of government spending to control inflation
a) Given Co = 400 and MPC = 0.70. Find Consumption when Yd = 2000 and when Yd = 3000. b) Given the consumption levels you found in part a), calculate Savings for both these levels of disposable income and consumption c) Calculate MPS d) Prove that MPS + MPC = 1 e) If autonomous consumption increases by $50. What is the multiplier? What is the change in total spending? f) Draw a diagram to show the effect of the multiplier in the economy? [Hint: What shifts and how?] Kindly answer this question correctly and type the answer here. Don’t give a handwritten answer on a page. And please answer it in 15 minutes. I will give you a thumbs up.
a) Given Co = 400 and MPC = 0.70. Find Consumption when yd = 2000 and when Yd = 3000. b) Given the consumption levels you found in part a), calculate Savings for both these levels of disposable income and consumption c) Calculate MPS d) Prove that MPS + MPC = 1 e) If autonomous consumption increases by 50. What is the multiplier? What is the change in total spending? f) Draw a diagram to show the effect of the multiplier in the economy? [Hint: What shifts and how? ] Kindly answer this question correctly and type the answer here. Don't give a handwritten answers on a page. And please answer it in 15 minutes. I will give you a thumbs up.

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