a)What will the multiplier be given the MPS values below? Fill in the table with your answers.  Instructions: round your answers to 2 decimal places.                               MPS                     Multiplier                 0.0                                     0.4                   0.5                  1.0   b) What will the multiplier be given the MPC values below? Fill in the table with your anwers.                                MPC                    Multiplier                                 1.0                                  0.9                                0.75                                0.5                                0   c) How much of a change in GDP will result if firms increase their level of investment by $ 8 billion and the MPC is 0.80? ( Enter your answers as whole numbers) How much of a change in GDP will result if firms incresese their level of investment by $ 8 billion and the MPC instead is 0.67?

97) You observe that unplanned inventories are increasing. You predict that there will be ________. A) a business cycle B) an expansion C) a trough D) a recession 98) Business cycle turning points are A) unaffected by, and unrelated to the multiplier. B) easy to predict. C) brought about by changes in autonomous expenditures that are then subject to the multiplier effect. D) None of the above is correct. 99) Which of the following does NOT occur as the economy moves from an expansion to a recession? A) An initial decrease in autonomous spending is the trigger that creates the business cycle turning point. B) The change in planned spending exceeds the change in real GDP. C) The multiplier process reinforces any decrease in spending and pushes the economy into recession. D) Incomes fall during recessions as firms cut production in response to unplanned increases in inventories. 100) Which of the following is INCORRECT? A) Expansions usually begin…

Is the relationship between changes in spending and changes in real GDP in the multiplier effect a direction (positive) relationship or is it an inverse (negative) relation- ship?

6) Suppose the economy is closed and is characterized by the following behavioral equations: C=C₁+C₁YD Y₁ = Y-T I=b₁ + b₂Y a. Government spending and taxes are constant. Solve for the equilibrium output. What is the value of the multiplier? How does the relationship between investment and output affect the value of the multiplier as compared to the case when investment was exogenous? For the multiplier to be positive what condition must (c₁ +b₁ ) satisfy? Explain your answers? b. Suppose that the parameter bo, sometimes called business confidence, increases. How will the equilibrium output be affected? Will investment change by more or less than the change in bo? Why? What will happen to national saving?