6. A. If the MPC is = to .9, what is the multiplier? B. If...
6. A. If the MPC is = to .9, what is the multiplier?
B. If the MPC is = to .75, what is the multiplier?
C. If the MPC is = to .6, what is the multiplier?
D. If the MPC is = to .5, what is the multiplier? 20 points
- If the MPC is = to .9, and spending increases by $30 billion, what is the increase in GDP? Show all work. 5 points
- If the MPC is = to .8, and spending increases by $30 billion, what is the increase in GDP? Show all work. 5 points
- If the MPC is = to .75, and spending increases by $30 billion, what is the increase in GDP? Show all work. 5 points
- If the MPC is = to .5, and spending increases by $30 billion, what is the increase in GDP? Show all work. 5 points
- Notice that in questions 7, 8, & 9 the MPC decreases, the increase in spending stays the same and the increase in GDP decreases. Why does that occur? 5 points
- If the MPC is = .9 and spending decreases by $100 billion, what happens to GDP? Show all work. 5 points.
Homework Answers
6) The multiplier is calculated as: 1/1-MPC
a) When the MPC is .9
Multiplier = 1/1-.9
=1/.1
=10
b) When the MPC is .75
Multiplier = 1/1-.75
=1/.25
=4
c) When the MPC is .6
Multiplier = 1/1-.6
=1/.4
=2.5
d) When the MPC is .5
Multiplier = 1/1-.5
=1/.5
=2
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