   Chapter 10, Problem 1WNG

Chapter
Section
Textbook Problem

Compute the multiplier in each of the following cases: a. MPC = 0.60 b. MPC = 0.80 c. MPC = 0.50

(a)

To determine

The multiplier value when MPC is 0.60.

Explanation

A multiplier is the times by which a change in the investment or income or tax can have on the level of output in the economy. Thus, the process under which a change in the autonomous spending of an individual creating additional income to another individual that increases the autonomous spending of the second individual that in turn works to generate additional income to the third individual and so on is known as the multiplier process.

The multiplier value can only be obtained with the marginal propensity to consume of the economy. The MPC is an important factor that determines the multiplier value. The multiplier value can be calculated with the help of the following equation:

Multiplier=11MPC

Thus, from the equation that is given above, it is identified that there is a direct relationship between the MPC and the multiplier value

(b)

To determine

The multiplier value when MPC is 0.80.

(c)

To determine

The multiplier value when MPC is 0.50.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

What rights do stockholders have?

Foundations of Business (MindTap Course List)

YIELD TO CALL It is now January 1, 2014, and you are considering the purchase of an outstanding bond that was i...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

What are the objectives of a cost management information system?

Cornerstones of Cost Management (Cornerstones Series) 