Homework: Demand-Side Equilibrium: Unemployment or Inflation?204080TU120180200REAL GDP (Billions of dollars)In the first economy (with MPC = 0.5), the $40 billion decrease in investment causes equilibrium output to decrease by%3Dbillion. In the secondeconomy (with MPC = 0.6), the $40 billion decrease in investment causes equilibrium output to decrease by Sbillion. Therefore, a lower MPCis associated with amultiplier.Now, confirm your graphical analysis algebraically using the oversimplified multiplier formula:Multiplier|3|1-MPCFor the first economy, with an MPC of 0.5, the effect of the $40 billion decrease in investment is as follows:Change in Equilibrium OutputChange in Total Erpenditure x MultiplierUsing the same method, the multiplier for the second economy is

Multiplier considers the change in output caused by the change in investment.

20 TUU 120 740 TOU TOU Z00 REAL GDP (Billions of dollars) In the first economy (with MPC = 0.5), the $40 billion decrease in investment causes equilibrium output to decrease by S billion. In the second economy (with MPC = 0.6), the $40 billion decrease in investment causes equilibrium output to decrease by S billion. Therefore, a lower MPC is associated with a v multiplier. Now, confirm your graphical analysis algebraically using the oversimplified multiplier formula: Multiplier = For the first economy, with an MPC of 0.5, the effect of the $40 billion decrease in investment is as follows: Change in Equilibrium Output = Change in Total Erpenditure x Multiplier Using the same method, the multiplier for the second economy is

20 TUU 120 740 TOU TOU Z00 REAL GDP (Billions of dollars) In the first economy (with MPC = 0.5), the $40 billion decrease in investment causes equilibrium output to decrease by S billion. In the second economy (with MPC = 0.6), the $40 billion decrease in investment causes equilibrium output to decrease by S billion. Therefore, a lower MPC is associated with a v multiplier. Now, confirm your graphical analysis algebraically using the oversimplified multiplier formula: Multiplier = For the first economy, with an MPC of 0.5, the effect of the $40 billion decrease in investment is as follows: Change in Equilibrium Output = Change in Total Erpenditure x Multiplier Using the same method, the multiplier for the second economy is

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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