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- 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 servicesWhat is the relationship between the marginal propensity to consume (mpc) and the multiplier?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.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 notCalculate the value of MPC if the multiplier is given to be as 1.4
- Suppose government purchases increase by 10 billion dollars, and as a result, real GDP increases by 15 billion dollars. Calculate the multiplier. Explain why the multiplier is generally greater than 1.What is the minimum value of multiplier?What 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…