If the mpc in the economy is equal to 4/5, then the expenditure multiplier is equal...

If the mpc in the economy is equal to 4/5, then the expenditure multiplier is equal to

Solutions

Expert Solution

MPC = 4/5 = 0.8 ,

MPC = 0.8

Then the ependiture Multiplier (K) =

= 5

ANSWER, Thus, If the mpc in the economy is equal to 4/5, then the expenditure multiplier is equal to 5

MPC = 0.8 ; (K) = 5

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Assume that the MPS in an economy is equal to 0.10. The multiplier must be equal...

Assume that the MPS in an economy is equal to 0.10. The multiplier must be equal to 10.00. 1.You have established that the multiplier is 10.00. Now assume that autonomous real consumption is $3 trillion. There is no other autonomous spending presently taking place in the economy. At what level is consumption equal to real GDP? $____trillion. (Round your answer to two decimal places) 2. You have established that the multiplier is 10.00 and that autonomous real consumption is $3...

Assume that the MPS in an economy is equal to 0.20 The multiplier must be equal...

Assume that the MPS in an economy is equal to 0.20 The multiplier must be equal to 5.00. You have established that the multiplier is 5.00. Now assume that autonomous real consumption is $3 trillion. There is no other autonomous spending presently taking place in the economy. At what level is consumption equal to real GDP? You have established that the multiplier is 5.00 and that autonomous real consumption is $3 trillion. There is an autonomous investment of $22 trillion...

Table 6.9 shows some of the expenditure amounts in the economy of Arkinia. The MPC, the...

Table 6.9 shows some of the expenditure amounts in the economy of Arkinia. The MPC, the MTR, and the MPM are all constant, as are the values of the three injections. Y T YD C S I G X IM XN AE (C + I + G + XN) 0 60 150 50 100 50 −10 30 200 75 120 5 ...

For the figure shown, answer the following questions: What is the expenditure multiplier in this economy?...

For the figure shown, answer the following questions: What is the expenditure multiplier in this economy? What is the marginal propensity to consume in this economy?

What is the importance of the expenditure multiplier?

If the marginal propensity to consume (MPC) is 0.9, then the multiplier for a change in...

If the marginal propensity to consume (MPC) is 0.9, then the multiplier for a change in autonomous spending will be A. 100. B. 0.1. C. 10. D. 9.

If the MPC is 0.9, what is the size of the multiplier and the total change...

If the MPC is 0.9, what is the size of the multiplier and the total change in real GDP demanded following a $1 billion decrease in spending? If the MPC is 0.8, what is the size of the multiplier and the total change in real GDP demanded following a $1 billion increase in spending? If the MPC is 0.75, what is the size of the multiplier and the total change in real GDP demanded following a $10 billion increase in...

At equilibrium real GDP in a private closed economy, Multiple Choice the MPC must equal the...

At equilibrium real GDP in a private closed economy, Multiple Choice the MPC must equal the APC. the slope of the aggregate expenditures schedule equals the MPS. aggregate expenditures and real GDP are equal. planned saving and consumption are equal. Government actions that were taken in order to stimulate the economy during the Great Recession of 2007–09 included the following, except Multiple Choice a significant reduction of interest rates to nearly zero. a large increase in transfer payments. an increase...

If the expenditure multiplier is 2.5 and the government spending increases by $4 billion, what would...

If the expenditure multiplier is 2.5 and the government spending increases by $4 billion, what would be the increase in the real GDP? Select one: a. $8 billion b. $6.5 billion c. $1.6 billion d. $10 billion Say’s Law states that supply creates its own demand. In the neoclassical zone on the graph above, supply is at its potential GDP, at full capacity. When aggregate supplies have reached their full potential output, what happens if demand shifts to the right?...

Suppose that for a particular economy and period, investment was equal to 100, government expenditure was...

Suppose that for a particular economy and period, investment was equal to 100, government expenditure was equal to 75, net taxes were fixed at 100, and consumption (C) was given by the consumption function C = 25 + 0.8YD where YD is disposable income and Y is GDP. a. What is the level of equilibrium income (Y). b. What is the value of the government expenditure multiplier? Of the tax multiplier? c. Suppose that investment declined by 40 units to...

Subjects