Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
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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Students have asked these similar questions
If national income now rises by £22 billion and as a result, the consumption of domestically produced goods rises to £80 billion. Calculate the marginal propensity to consume (MPC)What is the value of the multiplier?
What is the value of the multiplier?
Comment on the results in part (3) and (4).
Calculate the value of MPC if the multiplier is given to be as 1.4
If the multiplier is 5, then the MPC is
Answer
0.05
0.5
0.6
0.8
Question 43
In a certain economy, when income is $200, consumer spending is $145. The value of the multiplier for this economy is 6.25. It follows that, when income is $230, consumer spending is
Answer
$151.25.
$166.75.
$170.20.
$175.00.
Chapter 11 Solutions
Macroeconomics (Fourth Edition)
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Similar questions
- How is it possible for investment spending to increase even in a period in which the real interest rate rises? Is the relationship between changes in spending and changes in real GDP in the multiplier effect a direct (positive) relationship or is it an inverse (negative) relationship? How does the size of the multiplier relate to the size of the MPC? The MPS? What is the logic of the multiplier-MPC relationship?arrow_forwardThe Federal Reserve was very worried about deflation in early 2009, which would raise real interest rates. Suppose the rate of deflation was 2%, unemployment went up 4%, investment spending fell $20 billion during that time, and that the multiplier was 2. Using the information given above, put the relevant data into the formula that defines the spending multiplier in your answer to question 19. Please do not calculate any answer in this question that will be done in question 21. Use of abbreviations used in class content for economic variables is OK.arrow_forwardAssume that the parameters of a particular economy are as follows: MPC = 0.6, MPM = 0.1. What is the value of the multiplier?arrow_forward
- The accompanying graph represents the aggregate consumption function for the small island nation of Pineapple Paradise. The people of Pineapple Paradise expect their future disposable income to increase. Use the graph to show an increase in consumption expenditures. What is the new level of aggregate autonomous consumer spending? 1 $1000 2 $3000 3 $2000 4 $4000arrow_forwardUse both numerical and graphical methods to find the multiplier effect of the following shift in the consumption function in an economy in which investment is always $220, government purchases are always $100, and net exports are always 2-40. (Hint: What is the marginal propensity to consume?)arrow_forwardThe 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 servicesarrow_forward
- Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.75. That is, if disposable income increases by $1, consumption increases by 75¢. Suppose further that last year disposable income in the economy was $500 billion and consumption was $450 billion. On the following graph, use the blue line (circle symbol) to plot this economy's consumption function based on these data.arrow_forwardQ1. Calculate the value of multiplier when mpc is 0.5.arrow_forward(Simple Spending Multiplier) For each of the following values for the MPC, determine the size of the simple spending multiplier and the total change in real GDP demanded following a $10 billion decrease in spending: MPC = 0.9 MPC = 0.75 MPC = 0.6arrow_forward
- Which of the following is a true statement about the multiplier? The multiplier rises as the MPC rises. The smaller the MPC, the larger the multiplier. The multiplier is a value between zero and one. The multiplier effect does not occur when autonomous expenditure decreases.arrow_forwardThe MPC measures the relationship between: a change in consumption and a change in income. change in consumption and savings. changes in consumption and changes in savings. the proportion of income to consumption at any given level of income. the total level of consumption and the total level of saving.arrow_forwardThe multiplier model: Consumption spending refers to ________ spending on goods and services.arrow_forward
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