Exploring Macroeconomics
7th Edition
ISBN: 9781285859446
Author: Sexton, Robert L.
Publisher: Cengage Learning
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Question
Chapter 15, Problem 9P
To determine
To explain:
The reason behind an economy with an MPC greater that 1 cannot reach a stable equilibrium in the aggregate expenditure model.
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Students have asked these similar questions
What are the equations for the consumption, net exports, and aggregate expenditures functions?
The following are exogenous (not directly affected by income):
G = 11
I = 4
X = M = 0
The consumption function is:
C = k + cY, where k = 3, c = 0.8
What is the equilibrium level of GDP?
What is the multiplier?
Will an economy with a high multiplier be more stable or less stable than an economy with a low multiplier in response to changes in the economy or in government policy?
Chapter 15 Solutions
Exploring Macroeconomics
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Similar questions
- If the MPC in an economy is 0.9, a $4 billion increase in government spending will ultimately increase consumption byarrow_forwardI'm doing economics homework and I'm being asked to find the multiplier when the MPS is 0.12 and MPC is 0.88. I'm trying to follow the formula and not sure where I'm getting lost.arrow_forwardIf the ratio of MPS and MPC is 1:4 then find the value of multiplier.arrow_forward
- Calculate investment expenditure from the following data about an economy which in equilibrium: National income =$1000 Marginal propensity to save=$0.25 Autonomous consumption expenditure=$200arrow_forwardWhat is the definition for the multiplier processarrow_forwardAnswer the following questions, which relate to the aggregate expenditures model:a. If Ca is $100, Ig is $50, Xn is -$10, and G is $30, what is the economy’s equilibrium GDP?b. If real GDP in an economy is currently $200, Ca is $100, Ig is $50, Xn is -$10, and G is $30, will the economy’s real GDP rise, fall, or stay the same?c. Suppose that full-employment (and full-capacity) output in an economy is $200. If Ca is $150, Ig is $50, Xn is -$10, and G is $30, what will be the macroeconomic result?arrow_forward
- What do you mean by multiplierarrow_forwardFor the following problem, assume that the MPC, b, takes into account how much consumers spend as total income (Y) in the economy is changes. (Also: Hint GDP = Total Y) So we can rewrite our consumption function as :C= a +bYAssume:a= $2900 billionb=.75GDP= $9,000 billion.A) What is C=B) What is S=C) If consumers were the only ones buying goods in the economy, would the economy have an excess supply of goods, excess demand of goods or would the economy be at equilibrium ?arrow_forwardAssuming that the MPC is 0.80, calculate the value of the government expenditures multiplier.arrow_forward
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