Suppose that when government lowers corporate taxes this results in an increase in business investment of $280 billion. Further assume that MPC = 0.93. Calculate the value of MPS: Calculate the value of the multiplier: Compute the first three rounds of multiplier effects and cumulative effect on AD: Cumulative effect on AD: 1st cycle: 2nd cycle: 3rd cycle: Compute the total cumulative impact on AD after an infinite number of cycles (the "nth" cycle):

Suppose that when government lowers corporate taxes this results in an increase in business investment of $280 billion. Further assume that MPC = 0.93. Calculate the value of MPS: Calculate the value of the multiplier: Compute the first three rounds of multiplier effects and cumulative effect on AD: Cumulative effect on AD: 1st cycle: 2nd cycle: 3rd cycle: Compute the total cumulative impact on AD after an infinite number of cycles (the "nth" cycle):

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter9: The Keynesian Model In Action

Section: Chapter Questions

Problem 4SQP

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Question

Suppose that when government lowers corporate taxes this results in an increase in business investment of $280 billion. Further assume that MPC = 0.93.

Calculate the value of MPS:

Calculate the value of the multiplier:

Compute the first three rounds of multiplier effects and cumulative effect on AD:

Cumulative effect on AD:

1^st cycle:

2^nd cycle:

3^rd cycle:

Compute the total cumulative impact on AD after an infinite number of cycles (the "nth" cycle):

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