Problem 2The Italian economy can be characterized by the following:TE45TE750$ 5,000 An economy saves 20 percent of any increase in income and there are noincome taxes or imports. Then, an increase in investment of $2 billion leads to ashort run increase in real GDP of *$2 billion$10 billion$0.4 billion$1.6 billionWhich of the following best describes the relationship between the MPC and themultiplier?The higher the MPC, the higher the multiplierThe higher the MPC the lower the multiplierThe lower the MPC, the higher the multiplierThere is no relationship between the MPC and the multiplier

It is given that; Marginal propensity to save (MPS) = 0.2 the increase in investment= $2 billion

An economy saves 20 percent of any increase in income and there are no income taxes or imports. Then, an increase in investment of $2 billion leads to a short run increase in real GDP of * O $2 billion O $10 billion O $0.4 billion O $1.6 billion

An economy saves 20 percent of any increase in income and there are no income taxes or imports. Then, an increase in investment of $2 billion leads to a short run increase in real GDP of * O $2 billion O $10 billion O $0.4 billion O $1.6 billion

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Problem 2
The Italian economy can be characterized by the following:
TE
45
TE
750
$ 5,000

An economy saves 20 percent of any increase in income and there are no
income taxes or imports. Then, an increase in investment of $2 billion leads to a
short run increase in real GDP of *
$2 billion
$10 billion
$0.4 billion
$1.6 billion
Which of the following best describes the relationship between the MPC and the
multiplier?
The higher the MPC, the higher the multiplier
The higher the MPC the lower the multiplier
The lower the MPC, the higher the multiplier
There is no relationship between the MPC and the multiplier

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