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

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

business economics

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Answer 1

Answer #1

Answer

Working by column

Multiplier =1/ (1-MPC)

100=1/ (1-MPC)

100-100MPC=1

MPC=99/100

MPC=0.99

=======

20=1/ (1-MPC)

20-20MPC=1

MPC=19/20=0.95

===================

Multiplier =1/ (1-0.6)

=2.5

Multiplier =1/ (1-0.5) =2

=================

Change in government spending =change in income /multiplier

=2000/20

=$100

==========

Change in income =change in government spending * multiplier

Change in income =100*15=1500

Change in income =2.5*-400=-1000

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Answer 2

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