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000 00-50,000 00-80.000 0.9 0.8 0.75

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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**Title: Understanding Government Spending and Tax Multipliers by Income Bracket** **Concept Summary:** This table demonstrates the values of the marginal propensity to consume (MPC), as well as the income/spending multiplier and the tax multiplier for different household income brackets. Analyzing these multipliers helps in assessing the economic impact of fiscal policies across different income levels. **Table Explanation:** | Household Income | MPC | Income/Spending Multiplier | Tax Multiplier | |-----------------------|-----|----------------------------|----------------| | $0–$30,000 | 0.9 | | | | $31,000–$50,000 | 0.8 | | | | $51,000–$80,000 | 0.75| | | | $80,000 and above | 0.6 | | | **Key Terms:** - **MPC (Marginal Propensity to Consume):** This is the proportion of additional income that a household is likely to spend on consumption. A higher MPC suggests that economic stimuli in the form of cash would lead to more consumer spending. - **Income/Spending Multiplier:** This metric is derived from the MPC and influences how much additional economic activity is generated from an increase in spending or investment. - **Tax Multiplier:** This indicates the effect of tax changes on the overall economy. It represents how changes in taxation influence overall spending patterns and economic output. **Note:** The column for income/spending and tax multipliers is yet to be filled out. Calculating these multipliers requires further analysis using the MPC values given for each income bracket. Understanding these concepts aids in crafting fiscal policies that target specific income groups to optimize economic stability and growth.
Transcribed Image Text:**Title: Understanding Government Spending and Tax Multipliers by Income Bracket** **Concept Summary:** This table demonstrates the values of the marginal propensity to consume (MPC), as well as the income/spending multiplier and the tax multiplier for different household income brackets. Analyzing these multipliers helps in assessing the economic impact of fiscal policies across different income levels. **Table Explanation:** | Household Income | MPC | Income/Spending Multiplier | Tax Multiplier | |-----------------------|-----|----------------------------|----------------| | $0–$30,000 | 0.9 | | | | $31,000–$50,000 | 0.8 | | | | $51,000–$80,000 | 0.75| | | | $80,000 and above | 0.6 | | | **Key Terms:** - **MPC (Marginal Propensity to Consume):** This is the proportion of additional income that a household is likely to spend on consumption. A higher MPC suggests that economic stimuli in the form of cash would lead to more consumer spending. - **Income/Spending Multiplier:** This metric is derived from the MPC and influences how much additional economic activity is generated from an increase in spending or investment. - **Tax Multiplier:** This indicates the effect of tax changes on the overall economy. It represents how changes in taxation influence overall spending patterns and economic output. **Note:** The column for income/spending and tax multipliers is yet to be filled out. Calculating these multipliers requires further analysis using the MPC values given for each income bracket. Understanding these concepts aids in crafting fiscal policies that target specific income groups to optimize economic stability and growth.
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