The multiplier effect of change in government purchases

Assignment Help Business Economics
Reference no: EM13892031

The multiplier effect of a change in government purchases

Consider a hypothetical closed economy in which households spend $0.50 of each additional dollar they earn and save the remaining $0.50.

The marginal propensity to consume (MPC) for this economy is _________, and the multiplier for this economy is __________.

Suppose the government in this economy decides to decrease government purchases by $250 billion. The decrease in government purchases will lead to a decrease in income, generating an initial change in consumption equal to

This decreases income yet again, causing a second change in consumption equal to 

The total change in demand resulting from the initial change in government spending is

Reference no: EM13892031

Questions Cloud

Amounts of money spent on clothing : It is known that amounts of money spent on clothing in a year by students on a particular campus follow a normal distribution with a mean of $380 and a standard deviation of $50. What is the probability that a randomly chosen student will spend less ..
Measured by forgone benefits of the next-best alternative : Opportunity cost is associated with choosing a particular decision that is measured by the forgone benefits of the next-best alternative. What example would you pose to explain this?
Let the random variable x follow a normal distribution : Let the random variable X follow a normal distribution with U(mu) = 50 and S2 = 64. Find the probability that X is less than 55. The probability is 0.2 that X is greater than what number?
Calculate your annual rate of return : Your cousin Jeremy has asked you to bankroll his proposed business painting houses in the summer. He plans to operate the business for 5 years to pay his way through college. He needs $5000 to purchase an old pickup, some ladders, a paint sprayer, an..
The multiplier effect of change in government purchases : The multiplier effect of a change in government purchases. Suppose the government in this economy decides to decrease government purchases by $250 billion. The decrease in government purchases will lead to a decrease in income, generating an initial ..
Baseball team and local stadium has commissioned study : The owner of a baseball team and local stadium has commissioned a study that showed the demand by fans for stadium seats (per playing date) to be P = 22 - 0.2Q, where P is the average price of a ticket and Q represents the number of seats (expressed ..
Long-run real interest rates are expected to increase : Long-run real interest rates are expected to increase. An accountant and an MBA student (who just finished his course of Managerial Economics) where interviewed regarding the effect on the firm they both work at. Keeping all else constant, their answ..
Assume that all seats and all games are the same in problem : The owner of a baseball team and local stadium has commissioned a study that showed the demand by fans for stadium seats (per playing date) to be P = 22 - 0.2Q, where P is the average price of a ticket and Q represents the number of seats (expressed ..
Which of the represents a short-run decision : Which of the following represents a short-run decision? A farmer discovers that the total cost of growing 2000 acres of corn is $400,000 and that the total cost of growing 2001 acres of corn is $401,000. The marginal cost of the 2001st acre of corn i..

Reviews

Write a Review

 

Business Economics Questions & Answers

  Illustrate what were the economic incentives for producers

In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, Illustrate what were the economic incentives for producers.

  What is the result of an increase in the price of bread

What is the result of an increase in the price of bread, a normal good? The demand curve shifts to the right. The demand curve shifts to the left. The quantity demanded increases. The quantity demanded decreases.

  Describe the elements of a cost schedule

Describe the cost function and explain the difference between a short-run and a long-run cost function. Describe the elements of a cost schedule which can be derived total, fixed, and variable costs. Compare and contrast the short-run cost function a..

  How would keynesian solve

How would Keynesian solve a recessionary gap using personal tax rates.

  Broadband technology refers

Broadband technology refers to ___________.

  Measure of well-being compare to the change in gdp

The participation of women in the U.S. labor force has risen dramatically since 1970. How do you think this rise affected GDP? Now imagine a measure of well-being that includes time spent working in the home and taking leisure. How would the change i..

  Q1 suppose that mnl logs harvested the logs in october 2011

q1. suppose that mnl logs harvested the logs in october 2011 and sold them to mnl number in december 2011. mnl number

  Qqd 2000 - 25 p 2 a where p represents cost as well as a

q.qd 2000 - 25 p 2 a where p represents cost as well as a is the number of weekly advertisements. presently the

  Illustrate what is the average labor productivity

Illustrate what is the average labor productivity, in terms of square feet per painter-hour.

  Protect the farmers entitlement with a liability rule

Consider a rancher-farmer economy. Assume that the rancher has no choice over how many cows to raise but either the farmer or the rancher (or both) can build a fence to eliminate the crop damage of $150. However, the costs of installing the fence are..

  Discuss market equilibrating process in relation

Experience does not necessarily have to be work experience. Discuss market equilibrating process in relation to your experience. One of early economic "laws" was called Say's Law which stated that supply creates its own demand.

  Find a pop culture reference from tv movie music magazine

find a pop culture reference from tv movie music magazine... of an economic concept. the reference can be anything we

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd