The multiplier is related to the marginal propensities. The MPC is (directly, inversely) related to the size of the multiplier. The MPS is (directly, inversely ) related to the size of the multiplier. What will multiplier and MPS be when the MPC is 9, and 0.5? MPC MPS Multiplier .5 How much of a change in GDP will result if firms increase their level of investment by $8 billion and the МPC is .75? A change in GDP will be computed.) (show how you

The multiplier is related to the marginal propensities. The MPC is (directly, inversely) related to the size of the multiplier. The MPS is (directly, inversely ) related to the size of the multiplier. What will multiplier and MPS be when the MPC is 9, and 0.5? MPC MPS Multiplier .5 How much of a change in GDP will result if firms increase their level of investment by $8 billion and the МPC is .75? A change in GDP will be computed.) (show how you

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter19: The Keynesian Model In Action

Section: Chapter Questions

Problem 11SQ

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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 will the multiplier be when the MPS is 0, 0.4, 0.6, and 1? What will it be when MPC is 1, 0.90, 0.67, 0.50, 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 0.80? If the MPC instead of 0.67?
Suppose that an initial $10 billion increase in investment spending expands GDP by $10 billion in the first round of the multiplier process. Also suppose that GDP and consumption both rise by $6 billion in the second round of the process. what is the MPC? What is the size of the Multiplier? If, instead, GDP and consumption both rose by $8 billion in the second round, what would have been the size of the multiplier?
Consider a hypothetical closed economy in which households spend $0.70 of each additional dollar they earn and save the remaining $0.30. The marginal propensity to consume (MPC) for this economy is0.7 , and the oversimplified multiplier for this economy is3.3333 . Suppose the government in this economy decides to increase government purchases by $300 billion. The increase in government purchases will lead to an increase in income, generating an initial change in consumption equal to$210 billion . This increases income yet again, causing a second change in consumption equal to$147 billion . The total change in demand resulting from the initial change in government spending is$1 trillion . The following graph shows the aggregate demand curve (AD1 ) for this economy before the change in government spending. Use the green line (triangle symbol) to plot the new aggregate demand curve (AD2 ) after the multiplier effect takes place. For simplicity,…
Suppose that an initial $ 10 billion increase in investment spending expands GDP by $ 10 billion in the first round of the multiplier process. Also suppose that GDP and consumption both rise by $ 6 billion in the second round of the process. Instructions: In parts a and b, round your answers to 1 decimal place. In part c enter your answer as a whole number. A) What is the MPC in this economy? B) What is the size of the multiplier? C) If, instead, GDP and consumption both rose by $ 8 billion in the second round, what would have been the size of the multiplier?
Suppose there is some hypothetical closed economy in which households spend $0.85 of each additional dollar they earn and save the remaining $0.15. The marginal propensity to consume (MPC) for this economy is____ , and the spending multiplier for this economy is ____. Suppose the government in this economy decides to decrease government purchases by $300 billion. The decrease in government spending will lead to a decrease in income, creating an initial change in consumption equal to _____ . This decreases income yet again, leading to a second change in consumption equal to ____ . The total change in demand resulting from the initial change in government spending is ____.