Business, 30.03.2020 21:42 lillybritn
The multiplier and the MPC Consider two closed economies that are identical except for their marginal propensity to consume (MPC). Each economy is currently in equilibrium with real GDP and total expenditure equal to $100 billion, as shown by the black points on the following two graphs. Neither economy has taxes that change with income. The grey lines show the 45-degree line on each graph. The first economy's MPC is 0.5. Therefore, its initial total expenditure line has a slope of 0.5 and passes through the point (100, 100). The second economy's MPC is 0.70. Therefore, its initial total expenditure line has a slope of 0.70 and passes through the point (100, 100). Now, suppose there is a decrease of $30 billion in investment in each economy. Place a green line (triangle symbol) on each of the previous graphs to indicate the new total expenditure line for each economy. Then place a black point (plus symbol) on each graph showing the new level of equilibrium output. (Hint: You can see the slope and vertical axis intercept of a line on the graph by selecting it.) MPC=0.5 New AE Line New Equilibrium 0 20 40 60 80 100 120 140 160 180 200 200 180 160 140 120 100 80 60 40 20 0 TOTAL EXPENDITURE (Billions of dollars) REAL GDP (Billions of dollars) 45-Degree Line AE Line MPC=0.70 New AE Line New Equilibrium 0 20 40 60 80 100 120 140 160 180 200 200 180 160 140 120 100 80 60 40 20 0 TOTAL EXPENDITURE (Billions of dollars) REAL GDP (Billions of dollars) 45-Degree Line AE Line In the first economy (with MPC = 0.5), the $30 billion decrease in investment causes equilibrium output to decrease by $ billion. In the second economy (with MPC = 0.70), the $30 billion decrease in investment causes equilibrium output to decrease by $ billion. Therefore, a lower MPC is associated with a multiplier. Now, confirm your graphical analysis algebraically using the oversimplified multiplier formula: Multiplier = 11−MPC For the first economy, with an MPC of 0.5, the effect of the $30 billion decrease in investment is as follows: Change in Equilibrium Output = Change in Total Expenditure × Multiplier = × = × = Using the same method, the multiplier for the second economy is .
Answers: 3
Business, 22.06.2019 08:00, connermichaela
Who is not spending wisely? erika goes shopping and saves her receipts. she totals how much she spent and writes it down. mia needs to buy a new pair of shoes because she joined the soccer team. she looks at newspaper ads to find the best price. lauren has been thinking about getting a puppy for a long time. she walks by the pet store at the mall and decides to get a puppy. erin makes a purchase online using a credit card. she knows that she can pay the entire bill when it arrives.
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Business, 22.06.2019 14:30, deku6
United continental holdings, inc., (ual), operates passenger service throughout the world. the following data (in millions) were adapted from a recent financial statement of united. sales (revenue) $38,901 average property, plant, and equipment 17,219 average intangible assets 8,883 1. compute the asset turnover. round your answer to two decimal places.
Answers: 2
Business, 22.06.2019 23:40, jaycobgarciavis
John has been working as a tutor for $300 a semester. when the university raises the price it pays tutors to $400, jasmine enters the market and begins tutoring as well. how much does producer surplus rise as a result of this price increase?
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Business, 23.06.2019 00:10, Frenchfries13
Warren company plans to depreciate a new building using the double declining-balance depreciation method. the building cost $870,000. the estimated residual value of the building is $57,000 and it has an expected useful life of 20 years. assuming the first year's depreciation expense was recorded properly, what would be the amount of depreciation expense for the second year?
Answers: 2
The multiplier and the MPC Consider two closed economies that are identical except for their margina...
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