Macroeconomics
4th Edition
ISBN: 9780393602487
Author: Jones, Charles I.
Publisher: W. W. Norton & Company
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Question
Chapter 11, Problem 8E
To determine
The difference between the original IS curve and the IS curve that includes the multiplier.
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In the table below, state what would be the impact on the MPE and the Multiplier if there is an increase
in
MPC, MPS, MPM and MTR. In each case state whether they increase, decrease or not be affected. Put
your answers in columns 2 and 3 of the table.
Event
(1)
MPC rises
MPS rises
MPM rises
MTR rises
Impact on the MPE
(2)
Impact on the multiplier
(3)
Calculate the value of MPC if the multiplier is given to be as 1.4
The multiplier process can occur when a decrease in investment spending… a) Increases household saving, causing consumers to buy more goods and services.b) Reduces household incomes, causing consumers to buy fewer goods and services.c) Increases household incomes, causing consumers to buy fewer goods and services.d) Reduces household incomes, causing consumers to buy more goods and services
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