Macroeconomics (MindTap Course List)
10th Edition
ISBN: 9781285859477
Author: William Boyes, Michael Melvin
Publisher: Cengage Learning
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Chapter 10, Problem 6E
To determine
Explain the effect of foreign repercussions on the value of the spending multiplier?
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Explain the concept of the spending multiplier.
What do you mean by multiplier
Will an economy with a high multiplier be more stable or less stable than an economy with a low multiplier in response to changes in the economy or in government policy?
Chapter 10 Solutions
Macroeconomics (MindTap Course List)
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- What is the multiplier effect and how is it beneficial to the economy?arrow_forwardIf a $20 increase in disposable income causes consumer spending to rise by $4, what is the multiplier?arrow_forwardAn increase in the marginal propensity to consume will make the spending multiplier ? An increase in taxes as a portion of income will make the spending mitltiplierarrow_forward
- The multiplier process can occur when a decrease in investment spending...arrow_forwardIf an economy is in recession, discuss the differing effects created by a tax cut vs. a GDP-G increase to close the gap. Use the concept of multipliers in your answer.arrow_forwardIn the country of Krugman, a business spent $100 million building a factory. GDP eventually increased by 200 million. People spend 11% of every dollar on imports. What is the marginal propensity to consume in this economy? Write your answer as a number, between 0 and 1. If you think the answer is 0, write 0.00, not 0. Answer: Study the graph below. When will the multiplier be biggest? Select one: The multiplier will be the same size no matter what Aggregate Demand is b. The multiplier will be one no matter what aggregate demand is When aggregate demand is at AD1 d. When aggregate demand is at AD3 e When aggregate demand is at AD2 Price Level AD₁ AS e All of these are true AD₂ AD₁ GDP Why is potential output called potential, when it is not actually the most the economy can produce? Select one: a. Because potential is the most the economy can produce right now, with the technology and workers and equipment we have right now. Ob. Because economists just like to be confusing for no reason…arrow_forward
- Germany injects $100 into the United States by purchasing new software. If the spending multiplier for the U.S. is 5, then the total increase in spending will be: a. b. C. d. $250. $10. $20. $500.arrow_forwardIllustrate how changes in investment (or other components of total spending) can increase or decrease real GDP by the multiplier effect.arrow_forwardIf a $100 billion increase in government spending results in a $500 billion increase in real GDP, then the value of the multiplier:arrow_forward
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