Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Question
Chapter 18, Problem 10SQ
To determine
The relationship between MPC and MPS.
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Briefly define the following terms and explain the relationshipbetween them:MPC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . MultiplierActual investment . . . . . . . . . . . . . . . . . . . . . Planned investmentAggregate expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . Real GDPAggregate output . . . . . . . . . . . . . . . . . . . . . . . Aggregate income
Find the value of change in income if change in investment is $200 and Multiplier is 6
Suppose the government seeks to achieve a balanced budget by levying taxes of $50 billion and making expenditures of $100 billion. How will this affect GDP if MPC=0.8?
Chapter 18 Solutions
Economics For Today
Ch. 18.4 - Prob. 1YTECh. 18 - Prob. 1SQPCh. 18 - Prob. 2SQPCh. 18 - Prob. 3SQPCh. 18 - Prob. 4SQPCh. 18 - Prob. 5SQPCh. 18 - Prob. 6SQPCh. 18 - Prob. 7SQPCh. 18 - Prob. 8SQPCh. 18 - Prob. 9SQP
Ch. 18 - Prob. 1SQCh. 18 - Prob. 2SQCh. 18 - Prob. 3SQCh. 18 - Prob. 4SQCh. 18 - Prob. 5SQCh. 18 - Prob. 6SQCh. 18 - Prob. 7SQCh. 18 - Prob. 8SQCh. 18 - Prob. 9SQCh. 18 - Prob. 10SQCh. 18 - Prob. 11SQCh. 18 - Prob. 12SQCh. 18 - Prob. 13SQCh. 18 - Prob. 14SQCh. 18 - Prob. 15SQCh. 18 - Prob. 16SQCh. 18 - Prob. 17SQCh. 18 - Prob. 18SQCh. 18 - Prob. 19SQCh. 18 - Prob. 20SQ
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- Table 2 shows elements in the national income accounts of an economy. Assume the economy is currently in equilibrium. elements billions Consumption (total) 80 Investment 9 Government Expenditure. 6 Imports 15 Exports 8 C) 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). D) What is the value of the multiplier? E) Comment on the results in part (c) and (d).arrow_forwardFind the value of change in investment if the value of multiplier is 5 and the change in national income is $1000 millionarrow_forwardIs the mpc in the multiplier .75? only because multiplier is 1/(1-mpc) which would make sense for .25 1-.75=.25 however what is mps?arrow_forward
- The year is 2010. The government has thought about strengthening the public following the collapse with an increase interest compensation for indebted households (direct payments to these parties). At the same time, the government wants to stimulate total expenditure and economic activity with the payment of such benefits. Statisticians have told the government that each person spends 65% of all their income he will get and each of them who gets the spending, he also spends 65% of it and this process keeps continue without end. Let's assume that the government will allocate 5 billion ISK to of the project. a. How much can it be estimated that the economy will recover in terms of of the total consumption that will occur due to these interest benefits taking into account the multiplier effect (e. Multiplier principle)? b. How much will the economy be stimulated if individuals spend 85% of the income they receive?arrow_forward2. e Examine the graph above. Suppose that government increases its spending, shifting the aggregate expenditure line upwards. GDP increases from GDP1to GDP2, and this amount is $550 billion. If the MPC is 0.8, calculate the difference between the points N and L to find out by how much the government spending changed.arrow_forwardThe ratio of the change in GDP to an initialchange in aggregate expenditures (AE) is thea. spending multiplier.b. permanent income rate.c. marginal expenditure rate.d. marginal propensity to consume.arrow_forward
- As the MPC rises, the multiplier falls does not change increases falls by .05 for each .01 increase in the MPCarrow_forwardHi there . can you please assit on the following below Q.1. HOW DOES GOVERNMENT SPENDING AFFECT THE LEVEL OF AGGREGATE AUTONOMOUS SPENDING , THE MULTIPLIER AND THE EQUILIBRIOUM INCOME IN THE ECONOMY?arrow_forwardExactly how are the MPC and MPS computed? Explain it by a numerical example.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_forwardI'm doing economics homework and I'm having trouble findong the MPC. In this particular problem, consumers' disposable income increased by $525 billion and their spending increased by $283 billion.arrow_forwardQ) Consider the multiplier model (in which the only component of expenditure that depends on income is consumption), and suppose that investment expenditures decrease by $50 million. All else equal, then the spending-balance level of output will A) increase by $50 million B) decrease by $50 million C) decrease by more than $50 million D) decrease by less than $50 million Explain it early and correctlyarrow_forward
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