Question

3. Fill in the blanks in the table below. Assume that MPC is constant for everyone in the economy.

MPC	Spending Multiplier	Change in government spending	Change in income
	100	$15
	20		$2,000
0.6		-$400
0.5		$450	$900

Answer 1

MPC	Spending multiplier=1/1-MPC	Change in government spending	Change in income
1-1/100 = 0.99	100	15	(100)(15)=1500
1-1/20 = 0.95	20	(2000/20) = 100	2000
0.6	1/1-0.6 = 2.5	-400	(-400)(2.5) = 1000
0.5	1/1-0.5 = 2	450	(450)(2) =900