Change in Equilibrium Real Income = Change in Planned Expenditure x Multiplier Using the same method, the multiplier for the second economy is x
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- Assume that Consumption is C = c(Y-T); Taxes T = tY; Investment / = -bi; and Government expenditure (G) is exogenous. Determine the multiplier for an increase in the tax rate.In the goods market when C(Yd) = c0 + c1Yd, the multiplier is bigger when:A. The marginal propensity to consume (c1) is smaller.B. The marginal propensity to consume (c1) is larger.C. The exogenous component of consumption (c0) is larger.D. The exogenous component of consumption (c0) is smaller.E. None of the above.The multiplier process can occur when a decrease in investment spending… a) Increases household saving, causing consumers to buy more goods and services.b) Reduces household incomes, causing consumers to buy fewer goods and services.c) Increases household incomes, causing consumers to buy fewer goods and services.d) Reduces household incomes, causing consumers to buy more goods and services
- Would each of the following lead to a decrease in national income? a. An increase in imports (Click to select) lead to a decrease in national income. b. A decrease in interest rates (Click to select) lead to a decrease in national income. c. A decrease in the money supply (Click to select) lead to a decrease in national income. d. An increase in the exchange rate (Click to select) e. A decrease in foreign incomes (Click to select) (Click to select) lead to a decrease in national income. lead to a decrease in national income. would would notWhat is the multiplier effect? The multiplier is simply the ratio of the change in (r spending. Multiplying the initial change in spending by the multiplier gives you the amount of change in real GDP. G ) to the initial change in The multiplier effect can work in a positive or a negative direction. An initial increase in spending will result in a (smaller, larger) increase in real GDP, and an initial decrease in spending will result in a larger (increase, decrease ) in real GDP. The multiplier magnifies the fluctuations in economic activity initiated by changes in investment spending, net exports, government spending, or consumption spending. The multiplier is related to the marginal propensities. The MPC is (directly, inversely ) related to the size of the multiplier. The MPS is (directly, inversely ) related to the size of the multiplier. What will multiplier and MPS be when the MPC is .9, and 0.5? MPC MPS Multiplier .9 .5 How much of a change in GDP will result if firms increase…Find out the value of the multiplier if the MPC is zero?
- Which of the following is a true statement about the multiplier? The formula for the multiplier overstates the real world multiplier when we take into account the impact of changes in GDP on imports, inflation and the interest rate. The larger the MPC, the smaller the multiplier. The multiplier is the ratio of the change in spending to the change in GDP. The multiplier makes the economy less sensitive to changes in autonomous expenditure.If autonomous consumption increases by $50. What is the multiplier? What is the change in totalspending? Use a diagram to show which curve shifts and how.Which of the following is a true statement about the multiplier? The multiplier rises as the MPC rises. The smaller the MPC, the larger the multiplier. The multiplier is a value between zero and one. The multiplier effect does not occur when autonomous expenditure decreases.
- If the value of MPC is 0.8, find the value of multiplier.Calculate the value of income if consumption is $440 and the average propensity to consume Is 0.88Based on the following information: C = 40 + 0.7Yd, T = Tg – R, I = 200, G = 350, Tg = 60, R = 40 calculate the equilibrium level of income (Ye). calculate the value of kG, kTg and kR, where k is the multiplier.. calculate the values of C, S and T at Ye level. calculate the new equilibrium level of income if I increases by 10 percent. if G increases to 550 units and it is fully funded by the rise in T, what is the impact on Ye? if Tg increases to 85 units and R increases to 50 units, what is the effect on the level of Ye? Given the following information. C = 600 + 0.8Yd , Yd = Y – T, Tg = 100, I= 200, R = 50, G = 350, X = 250 and M = 200 + 0.1Y. Calculate the equilibrium level of income (Ye). Show the equilibrium level of income by using diagrams of both aggregate expenditure-income (AE-Y) approach and injection-leakage approach, How much investment should be increased if the government wants to increase the national income by 2000? How much tax has to be reduced so that…
