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- 5. The multiplier effect of a change in government purchases3. Complete the following chart to calculate the spending and tax multipliers. Spending Multiplier Таx MPC MPS Multiplier 0.05 0.9 0.2 0.75 0.6 0.5 1Aggregate Expenditures 800 600 400 200 0 15 04 Income Refer to the above graph to answer this question. What is the value of the multiplier in this economy? 200 400 600 800 1000 167 A AE 02 O Cannot be determined.
- 6. The multiplier effect Consider a hypothetical economy. Households spend $0.60 of each additional dollar they earn and save the remaining $0.40. The multiplier for this economy is Suppose government purchases, G, in this economy increase by $250 billion. The increase in G will lead to an increase in income, generating an increase in consumption that increases income yet again, and so on. Fill in the following table to show the impact of the change in G on the first two rounds of consumption spending and, eventually, on national income. Note: Use negative signs if numbers are negative. Change in G = $250 billion First Change in Consumption = $ billion Second Change in Consumption 24 billion Total Change in Income = billion Now consider the impact of a similar change in taxes. The (absolute value) of the tax multiplier in this question will be ; thus, if taxes change by $250 billion, spending will change by $ billion. Based on your results, this Keynesian model predicts that a change…During 2019, a country reported that its real GDP increased by $3.0 billion. The multiplier for this economy is known to be equal to 10.Which of the following might have caused the increase in real GDP? Question 12Answer a. Exports increased by $0.3 billion. b. Investment decreased by $0.3 billion. c. Exports decreased by $0.3 billion. d. Imports increased by $0.3 billion. e. Government expenditure on goods and services increased by $3 billion.4. Given this diagram; what is the equilibrium level of income? 5. Given this diagram; what is the level of "autonomous spending"? 6. Given this diagram, what is the simple income multiplier?
- If the government 40 M on building a new highway calculate the multiplier and total new income qiven the following. MPC .85 MPS .1 MPC .6 Multiplier 4.8Use the table below to answer the following questions. Real Consumptio GDP n $300 310 320 330 340 350 360 $290 298 306 314 322 330 338 (a) What is the size of the multiplier in this economy? Now, calculate the multiplier when the MPS is .5, .25, .10. What is the relationship between MPS and the multiplier? (b) If taxes were zero, government purchases were $10, investments $6, and net exports were zero, what is the equilibrium GDP? (c) If taxes are $5, government purchases are $10, investment is $6, and net exports are zero, what is the equilibrium GDP? (d) Assume that investment, net exports, and taxes are zero. Government purchases are $30, and the full-employment GDP without inflation is $330. How much must government spending be reduced to eliminate the inflationary expenditure gap?Chapter 14 Explain the basic idea of the expenditure multiplier and the role consumers play.
- 6. Is the relationship between changes in spending and changes in real GDP in the multiplier effect a direct (positive) relationship or is it an inverse (negative) relationship? How does the size of the multiplier relate to the size of the MPC? The MPS? What is the logic of the multiplier-MPC relationship?Explain the basic idea of the expenditure multiplier and the role consumers' play.1. What would happen to multiplier if investment were to be positively related to income? 2. is it possible for total saving to fall when people beome more thirfty? 3. What is meant by multiplier?Why shoul the value of multiplier rise when people spend more on consumption?