The multiplier process depicted in the following table is based on an MPC of 0.75. a. Recompute the first four cycles using an MPC of 0.80. MPC = 0.75 MPC = 0.80 Change in Spending during Сycle Cumulative Increase in Spending Change in Spending during Cycle Cumulative Increase in Spending Cycles Spending (billions per year) (billions per year) (billions per year) (billions per year) 1 $100.00 $100.00 $100.00 2 75.00 175.00 3 56.25 231.25 4 42.19 273.44 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? billion c. What is the value of the multiplier (1) if MPC = 0.75? (ii) if MPC = 0.80? %3! 00
The multiplier process depicted in the following table is based on an MPC of 0.75. a. Recompute the first four cycles using an MPC of 0.80. MPC = 0.75 MPC = 0.80 Change in Spending during Сycle Cumulative Increase in Spending Change in Spending during Cycle Cumulative Increase in Spending Cycles Spending (billions per year) (billions per year) (billions per year) (billions per year) 1 $100.00 $100.00 $100.00 2 75.00 175.00 3 56.25 231.25 4 42.19 273.44 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? billion c. What is the value of the multiplier (1) if MPC = 0.75? (ii) if MPC = 0.80? %3! 00
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![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] billion
c. 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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4310c92e-bcd2-4ba6-8047-b0a5242a83fc%2Fd3ba7541-cd60-4073-a997-3e7f7aae6c07%2Frkrb0b_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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] billion
c. 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.
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