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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Two counties are in a recession. Country A has an MPC of Chapter D, Problem 23CTQ, Two counties are in a recession. Country A has an MPC of and Country B has an MPC of In which , example  1 and Country B has an MPC of Chapter D, Problem 23CTQ, Two counties are in a recession. Country A has an MPC of and Country B has an MPC of In which , example  2 In which country will government spending have the greatest impact?

To determine

The impact of government spending on two countries which have MPC of 0.8 and 0.6 respectively is to be determined.

Explanation

The value of spending multiplier can be computed by the following:

  Spending Multiplier=11MPC

Thus, the spending multiplier for the country A having the MPC of 0.8 :

  Spending Multiplier=11MPC=110.8=5

Now, the spending multiplier for the country B having the MPC of 0

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