Economics: Principles and Policy (MindTap Course List)
13th Edition
ISBN: 9781305280595
Author: William J. Baumol, Alan S. Blinder
Publisher: Cengage Learning
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Chapter 26.A, Problem 1DQ
To determine
Explain multiplier and marginal propensity to consume (MPC).
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Students have asked these similar questions
1. What is meant by "autonomous consumption"?
2. Explain the consumption puzzle?
Which of the following statements best describes the multiplier effect in economics?
A. The process of reducing government spending to stimulate economic growth.
B. An increase in consumer saving when government expenditure decreases.
c. A phenomenon where an initial increase in spending leads to a more significant overall increase in
economic output.
D. The concept of a fixed relationship between inflation and unemployment rates.
A) What is the value of the marginal propensity to consume? ( Round your answers to one decimal place). What is the value of the marginal propensity to save?
B) What is the break-even level of income in the table? (Enter your answer as a whole number)
What is the term that economists use for the saving situation shown at the $ 240 level of income.
C) For each of the following items, indicate wheter the value in the table is either constant or variable as income changes:
The MPS is (constant/ variable) as income changes.
The APC is ( constant/ variable) as income changes.
The MPC is ( constant/ variable) as income changes.
The APS is (constant/ variable) as income chnages.
Chapter 26 Solutions
Economics: Principles and Policy (MindTap Course List)
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Similar questions
- In the goods market when C(Yd) = c0 + c1Yd, the multiplier is bigger when:A. The marginal propensity to consume (c1) is smaller.B. The marginal propensity to consume (c1) is larger.C. The exogenous component of consumption (c0) is larger.D. The exogenous component of consumption (c0) is smaller.E. None of the above.arrow_forwardFor the multiplier to be positive what condition must be satisfied?arrow_forwardConsider the graph below: Planned Aggregate Expenditure (PAE, billions of $) 1000 900 800 700 600 500 400 300 200 100 0 100 200 300 400 500 600 700 800 1 PAE 2 PAE Y PAE₁ 900 1000 Actual Aggregate Expenditure (Output or GDP, billions of $) a. What is the expenditure multiplier in this economy? b. What is the marginal propensity to consume in this economy?arrow_forward
- What is the multiplier effect? The multiplier is simply the ratio of the change in (r spending. Multiplying the initial change in spending by the multiplier gives you the amount of change in real GDP. G ) to the initial change in The multiplier effect can work in a positive or a negative direction. An initial increase in spending will result in a (smaller, larger) increase in real GDP, and an initial decrease in spending will result in a larger (increase, decrease ) in real GDP. The multiplier magnifies the fluctuations in economic activity initiated by changes in investment spending, net exports, government spending, or consumption spending. The multiplier is related to the marginal propensities. The MPC is (directly, inversely ) related to the size of the multiplier. The MPS is (directly, inversely ) related to the size of the multiplier. What will multiplier and MPS be when the MPC is .9, and 0.5? MPC MPS Multiplier .9 .5 How much of a change in GDP will result if firms increase…arrow_forwardIf the marginal propensity to consume is 0.95, Instructions: In part a, enter your response as a whole number. In part b, ent a. What is the value of the multiplier? b. What is the marginal propensity to save?arrow_forwardEconomists often refer to the “multiplier effect.” What is the “multiplier effect,” and how is its magnitude related to the size of the marginal propensity to consume?arrow_forward
- What is individual Marginal Propensity to Consume and Marginal Propensity to Save? please provide an example for each.arrow_forwardO Macmillan Learning The graph represents consumption (C) as a function of disposable income (DI). Assume the consumption function is linear. What is the value of the marginal propensity to consume (MPC)? Round the value of the MPC to two decimal places. Consumption $1050 900 MPC = 750 600 450 300 150 C = DI C 0 $150 300 450 600 750 900 1050 Disposable incomearrow_forwardStudy the scenario and complete the question(s) that follow(s): Silesia You are provided with the following information about an imaginary economy called Silesia. Use the information provided in the table to answer the questions below. Government expenditure 400 Exports 250 Autonomous imports 50 Autonomous consumption 150 Investment Expenditure 300 Full-employment output 2040 Marginal propensity to consume 0.75 Marginal propensity to import 0.15 Таx rate 0.25 5.1 Derive and calculate the consumption function for the data provided. Show all formulas and calculations used. 5.2 Calculate autonomous spending. Show all formulas and calculations used. 5.3 Calculate the multiplier. Show all formulas and calculations used. Round off your final answer to 1 decimal. 5.4 Calculate the equilibrium level of income, using the values calculated in 5.2 and 5.3 above. Show all formulas and calculations used. 5.5 Calculate the government surplus or deficit at the equilibrium level of income. Show all…arrow_forward
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