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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
Publisher: Cengage Learning
ISBN: 9781337617383
BuyFind

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
Publisher: Cengage Learning
ISBN: 9781337617383

Solutions

Chapter
Section
Chapter 10.2, Problem 3ST
Textbook Problem

What happens to the multiplier as the MPC falls?

Expert Solution
To determine

Impact of fall in MPC on the multiplier value.

Explanation of Solution

Multiplier value shows us that how much times more impact will be on the economy due to a small change in the income or investment in the economy. The multiplier value is calculated with the help of the Marginal propensity to consume (MPC) by the people and the simple multiplier formula is as follows:

Multiplier value=11MPC

When the MPC of the economy was 0.70, the multiplier value of the economy was 3.33. The multiplier value can be calculated for 0.60 and 0.80, respectively, as follows:

Multiplier value=11MPC=110.60=10

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Chapter 10 Solutions

Economics (MindTap Course List)
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Ch. 10.4 - What happens in the economy if total expenditures...Ch. 10 - How is Keyness position different from the...Ch. 10 - Classical economists assumed that wage rates,...Ch. 10 - Give two reasons explaining why wage rates may not...Ch. 10 - How was Keyness position different from the...Ch. 10 - According to some economists, why might business...Ch. 10 - Given the Keynesian consumption function, how...Ch. 10 - Look at the Keynesian consumption function: C = C0...Ch. 10 - Using the Keynesian consumption function, prove...Ch. 10 - Explain the multiplier process.Ch. 10 - What is the relationship between the MPC and the...Ch. 10 - Explain how a rise in autonomous spending can...Ch. 10 - In which factors will a change lead to a change in...Ch. 10 - According to Keynes, can an increase in saving...Ch. 10 - What factors will shift the AD curve in the simple...Ch. 10 - According to Keynes, an increase in saving and a...Ch. 10 - Can a person believe that wages are inflexible...Ch. 10 - According to Keynes, can the private sector always...Ch. 10 - What does the aggregate supply curve look like in...Ch. 10 - In the simple Keynesian model, increases in AD...Ch. 10 - Suppose consumption rises while investment and...Ch. 10 - Explain how to derive a total expenditures (TE)...Ch. 10 - What role do inventories play in the equilibrating...Ch. 10 - Identify the three states of the economy in terms...Ch. 10 - If Real GDP is 10.4 trillion in Exhibit 13, what...Ch. 10 - How will a rise in government purchases change the...Ch. 10 - Compute the multiplier in each of the following...Ch. 10 - Write an investment function (equation) that...Ch. 10 - Economist Smith believes that changes in aggregate...Ch. 10 - Use the accompanying figure to explain the...Ch. 10 - The TE curve in Exhibit 12 (d) is upward sloping...Ch. 10 - In Exhibit 12(d), what does the vertical distance...Ch. 10 - In the accompanying figure, explain what happens...Ch. 10 - In the accompanying figure, if Natural Real GDP is...

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