What are the qualifications and limitations of multiplier

Assignment Help Macroeconomics
Reference no: EM13181466

Congress is considering a tax credit program for those who purchase energy-efficient appliances. Proponents of the program have said that $400 million will be given directly to taxpayers and argue that this will have an economic effect that is greater than the original $400 million spent because of the multiplier effect. Many voters and taxpayers are not familiar with the concept of a multiplier in this sense. Your think tank has decided to produce a short report that will help voters better understand the proponents' claims, and Gabe has asked you to write this report.

Be sure to include the following in your report:

* Give a basic explanation of how the multiplier concept is computed, including MPC.
* Assume that the average American's marginal propensity to consume (MPC) is 2/5, and American producers' MPC is also 2/5.
* Calculate the following, explaining how you arrived at each result:
o The amount consumers will spend on new consumption
o The amount of new spending from producers
o The multiplier in this case
o The total increase in spending from the primary spending of $400 million
* Explain the multiplier concept as it applies in this case.
* What are the qualifications and limitations of the multiplier model?

Reference no: EM13181466

Questions Cloud

Find the height to the nearest hundredth of a centimeter : find the height to the nearest hundredth of a centimeter. use 3.14 for pi.
What is the value of the bond at the present time : What is the value of the bond at the present time, what will the bond be worth at maturity and are there differences in bond prices?
What is the range of the slopes : Name at least one situation in real life where you measure slope? What is the range of the slopes you encounter for this measurement?
State solute is an electrolyte or nonelectrolyte : When given a problem with an aqueous solution containing Na3PO4 and you need to find the boiling point of the solution only knowing the solution is 18.7% by mass Na3PO4 and the Kb for water is .512 It also says to consider if the solute is an elec..
What are the qualifications and limitations of multiplier : Congress is considering a tax credit program for those who purchase energy-efficient appliances. Proponents of the program have said that $400 million will be given directly to taxpayers and argue that this will have an economic effect that is gre..
Forecasting interest rates based on prevailing conditions : discuss the impact of each of the factors on your opinion. Offer some logic or current reference(s) to support your answer. Which factor do you think will have the biggest impact on interest rates?
What is the speed of the current : A motorboat can maintain a constant speed of 43 miles per hour relatuve to the water. The boat makes a trip upstream to a certain point in 52 minures; the return trip takes 34 minutes. What is the speed of the current?
Compute the expectations of x and y : One of the students is randomly selected. Let X denote the number of students that were on the bus carrying this randomly selected student. One of the 4 bus drivers is also randomly selected. Let Y denote the number of students on his bus. Compute..
State temperature the partial pressure of water : initially the temperature is 97.3 degrees celsius. At this temperature the partial pressure of water is 745 mm Hg (torr). What is the % by mass of aniline in the distillate?

Reviews

Write a Review

Macroeconomics Questions & Answers

  Group to that each consumer belong to explain how

If you could identify which the group to that each consumer belong to explain how would you go about setting prices.

  Illustrate the impact of inflation on consumption aggregate

Illustrate the impact of inflation on consumption, aggregate demand.

  How does the private investment change

Since the US gov't was running a budget deficit at the time, assume that the war was financed by gov't borrowing. How does the equilibrium interest rate and private investment change in response to gov't expenditure on the war?

  Illustrate how you would use the rest of the information

Illustrate how you would use the rest of the information above to better assess the impact of the influx of immigrants.

  Analysis of specific news article related to economics

You will be asked to collect five (5) newspaper articles relating to subjects we are covering in the class. As we cover the various chapters you should be actively searching newspapers/magazines to find articles.

  Developed country known as ldc encourages direct foreign inv

Suppose that a less developed country known as LDC encourages direct foreign investment

  Illustrate what sources of information were researched

Illustrate what sources of information were researched and utilized. What economic measures are commonly used in discussions of the health of the economy.

  Calculating the dividend yield

Springsten Music Corporation earned $820 million last year and paid out 20% of earnings in dividends. By how much did the company's retained earnings increase?

  Illustrate the difference among midpoint price elasticity

Illustrate the difference among the midpoint price elasticity.

  Calculate equilibrium level of national income

Assume W = 10 000. Draw the aggregate expendi­ture function on a scale diagram along with 45°line. What is the equilibrium level of national income?

  Consumption tax on the loan able funds market graphically

Show the effect of moving to a consumption tax on the loan able funds market if people react favourably to the incentive to save. Choose which curve or curves you believe are affected.

  Calculate the stackberg equilibrium

Suppose two identical firms produce widgets and they are the only firms in the market. Find out the Stackleberg Equilibrium.

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