Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 10, Problem 3RQ
To determine
MPS and MPC.
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Exactly how are the MPC and MPS computed? Explain it by a numerical example.
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The MPC is 0.5. what happens to the real GDP if the government increases spending by $10 million?
Chapter 10 Solutions
Macroeconomics
Ch. 10.2 - Prob. 1QQCh. 10.2 - Prob. 2QQCh. 10.2 - Prob. 3QQCh. 10.2 - Prob. 4QQCh. 10.5 - Prob. 1QQCh. 10.5 - Prob. 2QQCh. 10.5 - Prob. 3QQCh. 10.5 - Prob. 4QQCh. 10 - Prob. 1DQCh. 10 - Prob. 2DQ
Ch. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - Prob. 5DQCh. 10 - Prob. 6DQCh. 10 - Prob. 7DQCh. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - Prob. 1RQCh. 10 - Prob. 2RQCh. 10 - Prob. 3RQCh. 10 - Prob. 4RQCh. 10 - Prob. 5RQCh. 10 - Prob. 6RQCh. 10 - Prob. 7RQCh. 10 - Prob. 8RQCh. 10 - Prob. 9RQCh. 10 - Prob. 1PCh. 10 - Prob. 2PCh. 10 - Prob. 3PCh. 10 - Prob. 4PCh. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7PCh. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Prob. 10P
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- suppose that the was experiencing a recession and the government inject R50 billion, resulting in a total change in real GDP of R200 billion. calculate MPC?arrow_forwardSuppose the MPC is .90 and the MPI is .10. If government expenditures go up $ 100 billion while taxes fall $ 10 billion, what happens to the equilibrium level of real GPD?arrow_forwardIf the MPC is 0.9 what will happen to GDP if the government cut spending bt $2.arrow_forward
- f the marginal propensity to consume is 0.75 and the federal government decreases spending by $200 billion the income-expenditure model predicts that real GDP will fall by: $750 billion $150 billion $1000 billion $800 billionarrow_forwardCalculating the MPSAnd MPC. In one year a consumer income increase by $200 and her consumption increase by $140 ? Her marginal propensity to consume is equal to __. Her marginal prosperity to save is equal to __. (Thanks)arrow_forwardFind the value of MPC if MPS is 0.4.arrow_forward
- With an MPC of 0.8, government spending increases $20 billion while taxes decrease $10 billion. Based on this data, what is the cumulative effect on GDP?arrow_forwardIf aggregate demand is increased by 4500 and MPC is 0.75, what is the increase in Y?arrow_forwardIf the MPS rises, then the MPC will: a. Fall b. Rise c. Stay the same In what direction will each of the following occurrences shift the consumption and saving schedules, other things equal? a. A large decrease in real estate values, including private homes. b. A sharp, sustained increase in stock prices. c. A 5-year increase in the minimum age for collecting Social Security benefits. d. An economywide expectation that a recession is over and that a robust expansion will occur. e. A substantial increase in household borrowing to finance auto purchases. Irving owns a chain of movie theaters. He is considering whether he should build a new theather downtown. The expected rate of return is 15 percent per year. He can borrow money at a 12 percent interest rate to finance the project. Should Irving proceed with this project? Which of the following scenarios will shift the investment demand curve right? (Select one or more answers) a. Business taxes increase b. The expected return…arrow_forward
- Consumption function: C = 85 + 0,5Yd Investment function: I = 75 Government spending: G = 70 Net Taxes: T = 0,25Y Disposable income: Yd Y – T Equilibrium: Y = C + I + G You are given the following model for the economy of a country without a foreign sector: (d) Solve for equilibrium income. (Hint: Be very careful in your calculations. They are not difficult, but it is easy to make careless mistakes that produce dramatically wrong results.) (e) How much does the government collect in taxes when the economy is in equilibrium? (f) What is the government’s budget deficit or surplus?arrow_forwardCould you do C and D A country has an initial real output of $162 Billion. What would the final output be expected to be if:a. The government spends $15 billion on infrastructure and the MPC of the country is 0.35b. The government reduces taxes by $3.5 billion and the MPW of the country is 0.75c. The government makes no changes to taxes or spending.d. The government decreases spending nationwide by $9 billion in a country where people are likely to withdraw 60 cents on every new dollar of income.arrow_forwardIf disposable income is 90 percent of national income, the marginal propensity to consume ( out of disposable income) is 0.75, and imports are 25 percent of national income. What is the simple multiplier?arrow_forward
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