4. Explain the GDP multiplier and how it works. How much of
the negative GDP gap which existed in 2009 was closed by the almost
800B$ increase in G? What was the actual multiplier? Were the tax
dollars well spent for the economic recovery? Why or why
not?
Describe how the multiplier works when the government
decreases spending?
Explain how the multiplier depends on the MPC and the income
tax rate. Provide intuition for your answer. What happens if MPC =
0? What happens if MPC = 1?
Draw the Keynesian consumption function and relate the size of
the multiplier to the slope of the Keynesian consumption
function.
1. a)
What is Multiplier? Explain how it works in an economy. 4
b) Explain the paradox of thrift. Why do you think it is a paradox?
3
c) Suppose the consumption function is given by C=300+0.75Y
while
investment spending is 900 with no govt. expenditure. 3
i. Determine the equilibrium level of national income and
consumption
expenditure.
ii. If investment spending increases to 1100, what will be the
effect on
equilibrium income?
iii. If the government desires to increase...
Define what the multiplier is AND explain how and why it
works.
Explain two argument against
Robert Gordon’s claim that wage stagnation is due to the
exhaustion of technological
progress.
Thoroughly and in detail, explain the AE approach to calculating
GDP.
Explain how this relates to both the Business Cycle concept and
the Production Possibilities Curve