Why can’t an economy with a MPC greater than one reach a stable equilibrium in the aggregate expenditure model?

Q: An economy is in equilibrium. Find Marginal Propensity to Consume from the following: National…

A: The provided information are: National income (Y) = 2000 Autonomous consumption (a) = 400 Investment…

Q: Calculate the value of multiplier if MPS is 0.73

A: In a fractional-reserve banking system, a money multiplier is one of several closely related ratios…

Q: In the table below, there are no taxes (so that that real GDP equals disposable income) and no…

A: Marginal propensity to consume(MPC) can be understood as the change in consumption expenditure with…

Q: The following table shows consumption (C), investment spending (I), and government purchases (G),…

A: Assume that, the income tax rate is 25%.  Base consumption is $100 (i.e., the consumption at zero…

Q: Suppose the government increases expenditures by $50 billion and the marginal propensity to consume…

A: Aggregate demand is the sum of Consumption, Investment, government spending and net export. So, AD =…

Q: enditu

A: Gross domestic products includes all final goods and services which are being produced by the…

Q: Question #4 - Use the aggregate expenditures model to demonstrate the multiplier effect

A: Introduction The multiplier is the amount by which we multiply a preliminary shift in aggregate…

Q: Calculate the value of Marginal propensity to consume. The value of Marginal propensity to save Is…

A: We are given with the value of Marginal propensity to save which is 0.88 Using this we need to…

Q: Calculate the value of the hvestment multiplier when MPC is given 0.90

A:

Q: If MPC in an economy is 0.73 and consumption spending increases by $1,172, what will overall GDP…

A: MPC is the marginal propensity to consume which is the percentage of change in consumption spending…

Q: Suppose the MPC is 0.8. The government wants to decrease Total Spending by $600. How should it…

A: MPC=0.8 Total Spending=$600 Multilplier= Change in Y/Change in G=1/1-MPC 600/Change in G=1/1-MPC

Q: On a seperate sheet of paper, using AE model, graph the baseline economy and the scenario with the…

A: The aggregate expenditures model shows the relationship between aggregate expenditure and real GDP.…

Q: How much of a change in GDP will result if firms increase their level of investment by $8 billion…

A: To determine the change in GDP resulting from an increase in investment, we can use the concept of…

Q: What is the difference between consumption and autonomous consumption?

A: Consumption refers to the purchase of goods and services by the people in an economy. Consumption…

Q: With an MPC of 0.8, government spending increases $20 billion while taxes decrease $10 billion.…

A: The effect of increase in government spending can be seen as: Multiplier: 11-MPC=11-0.8=5 The…

Q: If MPC was equal to 0.5, would doubling your income double your consumption spending

A: The marginal propensity to consume (MPC) refers to the incremental change in income that is consumed…

Q: Explain how the multiplier affects equilibrium real GDP. Give examples

A: When talking about multiplier in economics, it can be said that it is the change in one variable due…

Q: If the marginal propensity to consume (MPC) equals 0.25 and the government increases spending by…

A: the marginal propensity to consume is a metric that quantifies induced consumption, the concept…

Q: Find the consumption expenditure from the following:- Autonomous consumption = $300 Marginal…

A: According to the question, we need to find the consumption expenditure and the values which are…

Q: What is the multiplier effect and how is it beneficial to the economy?

A: The multiplier effect shows the change in final income due to an injection of spending. For example,…

Q: An example of fiscal policy is: A) decrease in the exchange rate OB) decrease in the price level C)…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: Calculate the value of multiplier if MPS is 0.43

A: The information given to us is as follows:- Marginal propensity to save = 0.43 We need to calculate…

Q: Suppose the MPC = 0.6.  If income increases by $100 billion, by how much would consumption change?…

A: MPC = 0.6 If income increases by $100 billion

Q: What is the value of MPC if marginal propensity to save is .1.

A: Given the value of marginal propensity to save = 0.1 Now we have to find the value of MPC.

Q: ​If the marginal propensity to consume of an economy is 0.7, then the simple spending multiplier is:

A: Marginal propensity to save is defined as that proportion of the aggregate increase in income which…

Q: Why do economic booms and recessions tend to be transmitted across national borders? Explain your…

A: In a recession, the incomes and economic activity in a nation decline along with the real GDP. On…

Q: Economists often refer to the “multiplier effect.” What is the “multiplier effect,” and how is its…

A: Multiplier effect says that to increase the total output in the economy, government have to spend a…

Q: Why would an increase in planned investment increase real GDP, but an unplanned increase in…

A: An optimistic approach towards the future growth of an economy leads to an increase in planned…

Q: The value of Marginal propensity to consume is double the value of Marginal propensity to save.…

A: We are given with the following information:- The value of MPC is double that of MPS I.e MPC = 2MPS…

Q: Calculate the value of MPS when the value of MPC is 0.13

A: The formula for MPS is given as:- MPS = 1 - MPC

Q: In the country of Krugman, a business spent $100 million building a factory. GDP eventually…

A: "Since you have asked multiple questions, we will solve first question for you .. If you want any…

Q: I'm doing economics homework and I'm being asked to find the multiplier when the MPS is 0.12 and MPC…

A: Given  MPS = 0.12 MPC = 0.88

Q: Describe the phenomenon of the multiplier effect?

A: The multiplier effect is the phenomenon of proportional change in a variable (such as income) due to…

Q: What is the consumption function for this economy?

A: Autonomous consumption ( a ) = 100 Autonomous Investment = 100 Marginal propensity to consume = 0.75…

Q: In 250 words or less, answer the following question. With reference to the multiplier process,…

A: The makers of those labor and products see an increment in pay by that sum. They utilize that pay to…

Q: The potential GDP of the country is 380 billion euros, and the actual is 240. The marginal…

A: The potential GDP is the GDP which is maximum or resources are used fully. economy reaches the full…

Q: Explain the concept of the spending multiplier.

A: Spending Multiplier = 1/MPS or 1/(1-MPC)Where,MPS = marginal propensity to save that is the…