May 15, 2019 · Question 1: If MPC is 0.9, then the simple multiplier is _____ . 10 (correct) Question 2: American taxes as a percent of total gross domestic product are _____ when compared to many European nations. relatively small (correct) ... Course Hero is not sponsored or endorsed by any college or university. ...
Jun 01, 2015 · If the MPC were 0.9 , then the multiplier would be 1 / ( 1 – MPC ) = 1 / ( 1 – 0.9 ) = 1 / 0.1 = 10 . In step 4 of figure 12.6 , households would receive $ 100 billion in new income . Of this $ 100 billion , they will spend 90 percent and save 10 percent . As a result , they will spend $ 90 billion dollars in step 5 .
Now with an mpc = 0.9, the multiplier = 10. With a ∆II of 50 million, ∆Y = mult ∆II ∆Y = 10 × 50 million ∆Y = 500 million.. Since the marginal propensity to consume ( mpc ) = 0.8 , the multiplier = 5 . ... Course Hero, Inc. Course Hero is not sponsored or endorsed by any college or university. ...
The correct answer is B. 10.
The value of the multiplier and MPC are directly related as the change in consumption with respect to a given change in income becomes the change in investment which keeps on changing unless the income becomes zero.
Understanding Marginal Propensity to Consume (MPC) The marginal propensity to consume is equal to ΔC / ΔY, where ΔC is the change in consumption, and ΔY is the change in income. If consumption increases by 80 cents for each additional dollar of income, then MPC is equal to 0.8 / 1 = 0.8.
Multiplier(k) = 1/( 1 - 0.8) = 1/ 0.2 = 10/2 = 5 times. Was this answer helpful?
If MPC is 0.6 the investment multiplier will be 2.5.
Therefore, the value of the multiplier is infinity.
The formula to determine the multiplier is M = 1 / (1 - MPC). Once the multiplier is determined, the multiplier effect, or amount of money needed to be injected into an economy, can also be determined. This amount is calculated by dividing the total amount of spending needed by the multiplier.Aug 6, 2017
We use the simple spending multiplier to estimate how much total economic output will increase when some component of aggregate demand increases. The formula for the simple spending multiplier is as follows: 1/MPS. To use it, simply multiply the initial amount of spending by the simple spending multiplier.Aug 15, 2021