**Consumption Equation and Multiplier Calculation**In this exercise, we are given the following equation to describe the consumption function:\[ C = 20 + 0.9Y \]Where:- $ C $ represents Consumption- $ Y $ is disposable income, which is given as $800 billion**Question:**What is the Multiplier?**Options:**a) 90 b) 0.1 c) 10 d) 20 **Explanation:**- To find the multiplier in macroeconomics, we use the formula: \[ \text{Multiplier} = \frac{1}{1 - \text{MPC}} \] where MPC is the marginal propensity to consume. Here, the MPC is 0.9 (from the equation $ 0.9Y $).- Using the formula: \[ \text{Multiplier} = \frac{1}{1 - 0.9} = \frac{1}{0.1} = 10 \]Therefore, the correct answer is option c) 10.

Answered: Image /qna-images/answer/ce63e948-04f2-4b1c-bcce-83729498acd7.jpg

Answered: If C = 20 + 0.9Y C= Consumption Y=…

Business

Economics

If C = 20 + 0.9Y C= Consumption Y= disposable income $800 billion What is the Multipler? 90 601 c 10 a 20

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: You are a financial analyst for the ABC Company. The director of capital budgeting has asked you to…

A: Time Cash Flow Discounted Cash Flow Accumulated Discounted Cash Flow 0 -7000 1 5500 2…

Q: Is it correct that if revenue budget balances capital budget also balances true/false

A: According to the given The revenue budget means detailing the initial sources from where the…

Q: For the net cash flow series shown, find the external rate of return using the ROIC method at an…

A: For the net cash flow created by a project to be lent or reinvested, the ERR (External Rate of…

Q: Give typing answer with explanation and conclusion In Engineering Economical Analysis NPW = Net…

A: In engineering economic analysis, NPW stands for Net Present Worth or Net Present Value. It is a…

Q: The tree in Karura forest grow such that the volume of timber at time t can be represented as 900t +…

A: Volume of timber at time 't' is given by the following function: Q(t) = 900t + 50t2 + 60t3 + 7t4…

Q: Outline the steps for determining the IRR for a mixed investment?

A: The metric used in capital budgeting help to assess the potential investments profit is known as IRR…

Q: The government should also consider an unconditional cash transfer program for an initial period of…

A: In this question the government is considering cash benefit to the people at the bottom of the…

Q: Illustrates how a project's profitability changes under an inflationary economy?

A: Inflation is the abnormal hike in the general price level of the economy in a specific period of…

Q: How can we calculate the net future of the project by using the equation?

A: Net future value, or NFV, is used to calculate future value of a current stream of payments.

Q: Describe the procedure that outlines the steps for determining the IRR for a mixed investment?

A: The internal rate of return (IRR) represents the interest rate that reduces the net present value…

Q: Organize each of the following equations to express P as a function of Q. Q as a function of P P as…

A: Answer in step 2

Q: 1. What is the value of ROR (i*) for the following equation? 0 = -20,000 + (29,000 21,000) (P/A,…

A: Given investment = 20000 Net cashflow = 29000 – 21000 = 8000 Time = 4 years

Q: What happens to GDDP if the investment icreases by 100 with MPC 0,8 and tax 20%

Q: Prior to the expansion, the Fountainbleau profits were $60m and the Eden Roc's profits were $25m.…

A: The question analyses decision-making and negotiation. It involves the profit-related concerns of…

Q: Which of the following is not an approach that can be used to perform a capital budgeting economic…

A: An economic analysis evaluates the costs and benefits. It ranks the projects based on economic…

Q: . Given the consumption function, C=0-75 Y and the investment function, I 110-0:25 i, then the…

Q: Explain with a figure NPW plot for a nonsimple investment with multiple rates of return?

A: Non simple cash flow contains more than one sign change. Non simple cash flow diagram is given…

Q: 1. A project earns $10,000 a year for five years. The present total value of the project is (using a…

A: Present worth (PV) is the ongoing worth of a future amount of cash or stream of incomes given a…

Q: Calculate the amount of L

A: Q = KL r = 50 w = 100 Q = 500

Q: emitting (LED) light req years, make financial sense? Suppose a typical 60-watt incandescent light…

A: Assume, Break-even cost is C.Equated annua l cost function of 60watt bu lb…

Q: Explanation it correctly and details. a. Explain why the IRR may contradict the ranking of NPV and…

A: Introduction Performance measures presented in percentages rather than dollars are preferred by…

Q: Question 1. If a company must choose between two projects, it should proceed with the one that…

A: If a company must choose between two projects, it should proceed with the one that generates a…

Q: If A = {x: O< x < 2} and B= {y: O<y<1/2}. Find C = AU B and D = A\B %3D

A: Given information: A = {x: 0<x<2} (This is set A) B = {y:0<y<1/2} (This…

Q: 1. Specialization and productio Suppose France produces only tablets and smartphones. The resources…

A: Answers 1.Remain constant Suppose France produces only tablets and smartphones. The resources…

Q: https://dirp4.pids.gov.ph/ris/pjd/pidspjd08-1unemployment.pdf 1. Explain the topic found on the…

A: Adam Smith is considered the father of economics. He was the first individual to notice that as long…

Q: Hello, I get about 1,000 on this one, I think I am using the factor tables wrong, or not using the…

A: where:Present Value is the present value of the cash flowCash Flow is the cash flow in the future…

Q: If an investment has an estimated cost of £1000, and it offers £550 the first and the second year…

A: The internal rate of return (IRR) is the interest rate that makes the net present value (NPV) zero.…

Q: Figure 2 shows the payments and revenues of a small project. If M.R.R.R=%12, Evaluate the project…

Q: P = ? 0 $500 $500 $500 $500 $500 $500 0 2 4 5 i = 10% $500 $500 $500 $500 6 7 8 $500 10 11 N 12 13…

A: Present value P0 is the sum of discounted values of future cash flows. It represents the equivalent…

Q: How can we consider the two mutually exclusive investment alternatives?

A: Investments are very important for the economy as the investment expenditure forms an important…

Q: Do you always choose for higher IRR for government projects

A: A project or investment should be pursued if its internal rate of return (IRR) is greater than the…

Q: Find out the value of multiplier when - (i) MPC (c) = .8, %3D (ii) MPS (s) = 0.25 %3D

Q: Do we use the MA RR as an established external interest rate? How?

A: Yes, we use the MARR as an established external interest rate.

Q: You have a project with the net cash flow summarized below. The project is not suitable for direct…

A: The reinvestment rate is the return a financial backer hopes to make subsequent to reinvesting the…

Q: Years 2022 2021 2020 Revenue of Dollarama $4,331 B $ 4,026 B $ 3,787 B

A: Economics for business is the empirical application of economic ideas and theories to the evaluation…

Q: Given that C- $600 +0.80Yd, what is the level of savings when disposable income is $3,200? -$40…

A: The economics as a study is based upon the idea that there is scarcity present in each economy. The…

Q: the Savings function of UAE is: S 0.25Y. The Goverment of UAE has spent 100 billion dirham to…

A: (Q) The Savings function of UAE is: S = 0.25Y. The Government of UAE has spent 100 billion dirhams…

Q: Given that C= $7,000 + 0.05 Yd, if the level of disposable income is $14,000, the level of…

A: Consumption function C = 7000 + 0.05Yd Disposable income = $14000

Q: True/False APC + MPS = 1 Is this above given equation true?

A: # Average propensity to consume is given as the ratio of consumption expenditure and income. On the…

Q: 5. Under the following parameter assumptions: A=10,n=1, d=0, B=1/2, a = 1/3, and ko= = 0.0500 kt an…

A: An economic production model that exhibits long run growth of the economy is known as Solow–Swan…

Q: You have been offered a unique investment opportunity. If you invest $10,800 today, you will receive…

A: Net present value, or NPV, is used to calculate the current total value of a future stream of…

Q: Critically compare the principles of the IRR and net present value methods including their…

A: B. Compare the principles of the IRR and net present value The net present value rule states that…

Q: Capital Budgeting using Net Present Value Method PV of Cost of Investment PV of Net Cashflow: Net…

Question

**Consumption Equation and Multiplier Calculation**

In this exercise, we are given the following equation to describe the consumption function:

\[ C = 20 + 0.9Y \]

Where:
- $ C $ represents Consumption
- $ Y $ is disposable income, which is given as $800 billion

**Question:**
What is the Multiplier?

**Options:**
a) 90
b) 0.1
c) 10
d) 20

**Explanation:**
- To find the multiplier in macroeconomics, we use the formula:
\[ \text{Multiplier} = \frac{1}{1 - \text{MPC}} \]
where MPC is the marginal propensity to consume. Here, the MPC is 0.9 (from the equation $ 0.9Y $).

- Using the formula:
\[ \text{Multiplier} = \frac{1}{1 - 0.9} = \frac{1}{0.1} = 10 \]

Therefore, the correct answer is option c) 10.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

12. RTOPIC: ENGINEERING ECONOMICS PLEASE ANSWER IN 4 DECIMAL POINTS
Pls help with below homework.
explain the effects of the risk of investment projects on the capital investment decisions of companies with details.
Q1) A restaurant uses 3000 kg of meat each month. The restaurant is replenishing the meat using an EOQ value of 2000 kg. The EOQ value was computed assuming an interest rate of 36 percent per year. Assume that the meat cost is 4TL per kg to the restaurant. What is the setup cost used in determining the EOQ value?0 What is the total cost of ordering and holding inventories?
A project that will provde annual cash flows of $2,350 for nine years costs $9,700 today. a. At a required return of 12 percent, what is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. At a required return of 28 percent, what is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. At what discount rate would you be indifferent between accepting the project and rejecting it? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) а. NPV b. NPV C. Discount rate %
Illustrate how a project's profitability changes under an inflationary economy?
Use the following information to answer the question which immediately follows 200-80r, L= 0.5Y Y 2,000 GT= 200, Cd 400+0.9(Y What is the value of investment 2. T)-600r. Id Select one: a 150 4 b. 160 360.5 d. 200 500, M-5000, P=7.35,=0.02 27
Name two key differences between “core” and “value added” real estate investment strategies
I need answer typing no chatgpt used
Typed plzzz and asap Thanks
The following cash flows result from a potential construction contract for Erstwhile Engineering. 1. Receipts of $600,000 at the start of the contract and $1,200,000 at the end of the fourth year. 2. Expenditures at the end of the first year of $500,000 and at the end of the second year of $1,100,000. 3. A net cash flow of zero at the end of the third year. Using an appropriate rate of return method, for a MARR of 25 percent, should Erstwhile Engineering accept this project? Erstwhile Engineering of return is percent, which is (Round to two decimal places as needed.) accept the project because the rate the MARR.
Suppose you have been appointed as afinancial advisor for an upcoming business in Oman which requires OMR 90,000 as Capital. Your job is to organize the finance required for the company from different types of available finance. Explain in detail how much amount of funds you will take from each type of finance source and why. Discuss in detail which type of finance is good for the company. Note / solve it by using the Financial Institutions & Services course for marketing purposes