The multiplier process depicted in the following table is based on a Marginal Propensity to Consume (MPC) of 0.75.a. Recompute the first four cycles using an MPC of 0.80.| Spending Cycles | MPC = 0.75 | | MPC = 0.80 | ||-----------------|------------|---------------------|------------|----------------------|| | Change in | Cumulative Increase | Change in | Cumulative Increase || | Spending | in Spending | Spending | in Spending || | during | | during | || | Cycle | | Cycle | || | (billions per year) | (billions per year) | (billions per year) | (billions per year) || 1 | $100.00 | $100.00 | $100.00 | [Blank] || 2 | 75.00 | 175.00 | [Blank] | [Blank] || 3 | 56.25 | 231.25 | [Blank] | [Blank] || 4 | 42.19 | 273.44 | [Blank] | [Blank] |b. Given that the MPC is higher, how much more consumption occurs in the first four cycles when the MPC = 0.80 as compared to when the MPC = 0.75?[Blank] billionc. What is the value of the multiplier? - (i) if MPC = 0.75? [Blank] - (ii) if MPC = 0.80? [Blank]Explanation:- The table shows the process of calculating the change and cumulative increase in spending over four spending cycles with different MPC values.- For MPC = 0.75, spending begins at $100 billion and decreases in each cycle, with a cumulative total of $273.44 billion by the fourth cycle.- You need to complete the table for MPC = 0.80 and answer the questions regarding the additional consumption and multiplier values.

Spending Cycles Change in Spending during cycles Cumulative increase in spending 1 $100 $100 2…

Answered: The multiplier process depicted in the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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