Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 25.A, Problem 2DQ
To determine
The relationship between multiplier and marginal propensity to consume (MPC).
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Chapter 25 Solutions
Economics: Principles & Policy
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- Give an example of any factor that influence the size of the multiplierarrow_forwardAssume: Y= C + I + G + NX C = 400 + (0.8)YD Io = 200 G = 300 + (0.1)(Y* - Y) YD = Y - TA + TR NXo = - 40 TA = (0.25)Y TRo = 50 How do I calculate the multiplier? Thank you.arrow_forwardWhat is the minimum value of multiplier?arrow_forward
- Required information Skip to question The basis of the parameters for an economy shown in Table 6.5. (All figures are in $billion.) Table 6.5 G = 1200 I = 400 C = 100 + 0.6Y XN = 700 - 0.2Y Refer to Table 6.5 to answer this question. What is the value of the multiplier in this economy? Multiple Choice 1. 1.54. 1.67. 2. 5.arrow_forwardAn economy is described by the following equations: Y = C + I, + G C = a + b(Y – T) T = tY %3D %3D Let a = 20,6 = 0.75, t = 0.25, I, = 100, G = 240 %3D (a) Determine the value of the multiplier for this economy, and find the equilibrium value of Y. (b) Find the values of C, T and G-T, given your answer to part (a). (c) Describe what would happen if the government tried to eliminate its budget deficit by undertaking a cut in G equal to the current value of G-T. HTML Editor B IUA A ▼ 回 深 D ¶ T 12pt Paragrap IIarrow_forwardAnswer the following questions and provide the necessary solutions. 1. Compute the multiplier if a) mpc = 0.95 b) mpc = 0.85 C) mpc = 0.6arrow_forward
- If the consumption function is given by C=20+3/4 Y then the value of multiplier will be???arrow_forwardThere might be many factors (economic and non-economic) that affect the size of the multiplier. What are some that you think could influence its size? Which ones do you think would make it larger, and which are more likely to make it smaller?arrow_forwardCalculate the value of MPC if the multiplier is given to be as 1.4arrow_forward
- A different economy can be modeled with these equations: C = 150 + b Yd, I = 260, G = 70, X = 280, M = 325, and T = 60. If the multiplier on Investment is 6.25, what is the value of b?arrow_forwardAssume an economy can be modeled with these equations: C = 210 + b Yd, I = 200, G = 103 - 0.054 Y, X = 280 M = 305 and T = -40 + 0.29Y. What is the value of b when the multiplier on Investment is 1.867? the answer is 0.73arrow_forwardAssuming the security bill does not change the position of the blue curve, place the gray point (star symbol) on the graph to show the effects of such a bill. (Hint: Be sure to plot your point on one of the black plus symbols.) SECURITY (Percent of terrorists caught) 50 9 30 0 0 + X 20 + 40 60 80 TOURISM (Millions of visitors per year) 100 (?) Again, suppose the first bill that is introduced mandates that security be improved so that the probability of catching a terrorist at the border increases from 10% to 25%, and these measures do not change the position of the blue curve. The opportunity cost of this increase in security is million visitors per year.arrow_forward
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