Suppose an economy has no income taxes or imports. How is the size of the expenditure...

Question

Question

Suppose an economy has no income taxes or imports. How is the size of the expenditure...

Suppose an economy has no income taxes or imports. How is the size of the expenditure multiplier related to the marginal propensity to consume? What is the multiplier if the MPC equals 0.25? If the MPC equals 0.50? If the MPC equals 0.90?

business economics

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

ANswer

Multiplier =1/(1-MPC)

the multiplier increases as the MPC increases

MPC=0.25

Multiplier =1/(1-0.25)=1.33333333=1.33

MPC=0.5

Multiplier =1/(1-0.5)=2

MPC=0.9

Multiplier =1/(1-0.9)=10

Add a comment

Answer 2

Similar Homework Help Questions

10.) An economy has a marginal propensity to consume and Y* , income-expenditure equilibrium GDP,...

10.) An economy has a marginal propensity to consume and Y* , income-expenditure equilibrium GDP, equals $500 billion. Given an autonomous increase in plannėd investment of $10 billion, show the rounds of increased spending that take place by completing the accompanying table. The first and second rows are filled in for you. In the first row the increase of planned investment spending of $10 billion raises real GDP and YD by $10 billion, leading to an increase in consumer spending...
An economy has no imports and no taxes, the MPC is 0.8, and real GDP is...

An economy has no imports and no taxes, the MPC is 0.8, and real GDP is $250 billion. Businesses decrease investment by $5 billion. Calculate the new level of real GDP. Explain why real GDP decreases by more than $5 billion. The new level of real GDP is $ billion. Real GDP decreases by more than $5 billion because the decrease in investment_ 0 A. induces an increase in saving O B. decreases the marginal propensity to consume O C....
Suppose there are no imports, taxes or other leakages in the economy. If the Marginal Propensity...

Suppose there are no imports, taxes or other leakages in the economy. If the Marginal Propensity to Consume is .80 and the government increases spending by $40 billion, by how much would output increase in the economy? Select one: a. $40 billion b. $48 billion c. $80 billion d. $120 billion e. $200 billion.

Suppose that when your income increases by $200, your consumption expenditures increases by $160. Your marginal...

Suppose that when your income increases by $200, your consumption expenditures increases by $160. Your marginal propensity to consume (MPC) is . If your MPC was the same as the MPC for the economy as a whole, the expenditure multiplier for the economy would be. . Thus, a $3 million investment project would increase income by million in total.
Suppose that when your income increases by $300, your consumption expenditures increases by $225. Your marginal...

Suppose that when your income increases by $300, your consumption expenditures increases by $225. Your marginal propensity to consume (MPC) is _________ . If your MPC was the same as the MPC for the economy as a whole, the expenditure multiplier for the economy would be ______________ . Thus, a $2 million investment project would increase income by $ _________ million in total.
Suppose the economy is in a recession and the president wants to stimulate production and create...

Suppose the economy is in a recession and the president wants to stimulate production and create jobs. To do this, he has decided to increase government spending. Some of his economic advisors are suggesting the marginal propensity to consume (MPC) has a value of 0.9 and others are suggesting the value is 0.8. If the MPC has a value of 0.9, then the expenditure multiplier has a value of Click to select) If the MPC has a value of 0.8,...

An economy has a fixed price level, no imports, and no income taxes. MPC is 0.50.5,...

An economy has a fixed price level, no imports, and no income taxes. MPC is 0.50.5, and real GDP is $250250 billion. Businesses increase investment by $55 billion. Calculate the multiplier and the change in real GDP. The multiplier is nothing. The increase in real GDP is $nothing billion.
Suppose that an economy has an income of $20,000 with a marginal propensity to consume of...

Suppose that an economy has an income of $20,000 with a marginal propensity to consume of 0.5. What is the multiplier? Give your answer to two decimals.
Consider two closed economies that are identical except for their marginal propensity to consume (MPC). Each economy is currently in equilibrium with real income and planned expenditure equal to $100...

Consider two closed economies that are identical except for their marginal propensity to consume (MPC). Each economy is currently in equilibrium with real income and planned expenditure equal to $100 billion, as shown by the black points on the following two graphs. Neither economy has taxes that change with income. The grey lines show the 45-degree line on each graph.The first economy's MPC is 0.5. Therefore, its initial planned expenditure line has a slope of 0.5 and passes through the...

Aggregate expenditure is total value added in the economy income of households, businesses, governments, and foreigners....

Aggregate expenditure is total value added in the economy income of households, businesses, governments, and foreigners. revenue from the sale of goods and services. spending on final goods and services. The MPC can be defined as the change in consumption divided by the change in income. change in income divided by the change in consumption. ratio of income to saving. ratio of saving to consumption. The relationship between the MPS and the MPC is such that MPC - MPS =...

Suppose an economy has no income taxes or imports. How is the size of the expenditure...

Homework Answers

Add Answer to:
Suppose an economy has no income taxes or imports. How is the size of the expenditure...

Post as a guest

Earn Coins

10.) An economy has a marginal propensity to consume and Y* , income-expenditure equilibrium GDP,...

An economy has no imports and no taxes, the MPC is 0.8, and real GDP is...

Suppose there are no imports, taxes or other leakages in the economy. If the Marginal Propensity...

Suppose that when your income increases by $200, your consumption expenditures increases by $160. Your marginal...

Suppose that when your income increases by $300, your consumption expenditures increases by $225. Your marginal...

Suppose the economy is in a recession and the president wants to stimulate production and create...

An economy has a fixed price level, no imports, and no income taxes. MPC is 0.50.5,...

Suppose that an economy has an income of $20,000 with a marginal propensity to consume of...

Consider two closed economies that are identical except for their marginal propensity to consume (MPC). Each economy is currently in equilibrium with real income and planned expenditure equal to $100...

Aggregate expenditure is total value added in the economy income of households, businesses, governments, and foreigners....

Suppose an economy has no income taxes or imports. How is the size of the expenditure...

Homework Answers

Add Answer to: Suppose an economy has no income taxes or imports. How is the size of the expenditure...

Post as a guest

Earn Coins

Add Answer to:
Suppose an economy has no income taxes or imports. How is the size of the expenditure...