Explain the basic logic behind the multiplier in words. Why does it require b, the marginal propensity

Question:

Explain the basic logic behind the multiplier in words. Why does it require b, the marginal propensity to consume, to be between 0 and 1?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Macroeconomics Principles And Policy

ISBN: 9780324586213

11th Edition

Authors: William J. Baumol, Alan S. Blinder

See More Books

Question Posted: Sep 01, 2012 02:45 AM

See More Questions

In the linear consumption function The (estimated) marginal propensity to consume (MPC) out of income is simply the slope, , while the average propensity to consume (APC) is Using observations for...
Why does the marginal propensity to consume determine the size of the multiplier?
An economy has a marginal propensity to consume of 0.5, and Y*, incomeexpenditure equilibrium GDP, equals $500 billion. Given an autonomous increase in planned investment of $10 billion, show the...
Explain how an increase in government expenditure will change the governments budget balance and the loanable funds market. The International Monetary Fund (IMF) reported that it acted effectively in...
Rework Problem 9.20 except that the compression ratio is a) 6 b) 8. Heat is added to the air in an Otto cycle in the amount of 500 Btu/lbm. The compression ratio for this engine is 10. Air enters the...
When using a benefit-cost analysis to evaluate multiple alternatives, which of the following approaches is acceptable? a. Ranking approach only b. Incremental approach only c. Either incremental or...
Fantastic Feathers Ltd sells feather quilts and has never used CVP analysis in its 4year history. The manager provides you with the following sales and cost data for the first 4 years of operation....
Thomas Bell, a minor, went to work in the Pittsburgh beauty parlor of Sam Pankas and agreed that when he left the employment, he would not work in or run a beauty parlor business within a 10-mile...
Question 2 (50 marks) Compute the slope and deflection of the point B in the diagram below. (a) Use the moment-area method. [25 marks] (b) Use the conjugate beam method. [25 marks] Assume P= (1+0.Y)...
Many of the computational models of cognitive activities that have been proposed involve quite complex mathematical operations, such as convolving an image with a Gaussian or finding a minimum of the...
For over 25 years now, imports have consistently exceeded exports in the U.S. economy. Many people consider this imbalance to be a major problem. Does this chapter give you any hints about why?
What would happen to the multiplier analysis if b = 0? If b= 1?
What is Social Security? What is Medicare? What is the economic role of these government programs?
Calculate Inventory Conversion Period, Receivables Conversion Period, the Payment Conversion Period, and the Operating Cycle for Innovation Inc. given the following information. Use 365 to get an...
Suppose your starting salary is $50,000. You would like to open a savings account to save for your retirement and any large future expenses. Most Economists agree that you should allocate 20% of your...
Sales for a new car is expected to grow according to the equation: S = 150000(1-e -0.06t ), where t = months i) Calculate the number of cars sold after one year. ii) Calculate the number of cars sold...
A contractor has to move 15 300 Bank m 3 of wet sandy material in rear dump trucks, which will be loaded by an excavator. Average face depth will be 2.4 m with 60-90 degree average swing angle. Ten...
BHT Company evaluates a project for a potential inclusion in its capital budget. In the first year of the project, it expects incremental net income of $33 million, depreciation expenses of $8...
Revenue and cost information for a future period including all opportunity costs is presented in Exhibit 6 for WR International, a newly formed corporation that engages in the manufacturing of...
Problem 2. (0.6 points, 0.2 points for each question) (a) A company turns its inventory 2 times a month. Its months-of-supply = Its days-of-supply = Please show your analysis below: _months. days. (1...
Determine whether the converse of the statement is false. If $|x|>4$, then $x^{2}>16$.
Explain the difference between an invention and an innovation. Give an example of each.
What is the difference between interest and profit? Who earns interest and in return for what contribution to production? Who earns economic profit and in return for what contribution to production?
What is the difference between interest and profit? Who earns interest and in return for what contribution to production? Who earns economic profit and in return for what contribution to production?
Water flows through a pipe section that tapers from an internal diameter of 200 mm down to 100 mm over a distance of 1 m. Determine the pressure drop over the section for a flow of 0.06 m3s-1. The...
Calculate the binding energy per nucleon for Be, 59 Co, 208 pb, and 195 pt. (For the atomic masses, see this table. Enter your answers to at least two decimal places.) (a) Be MeV/nucleon 59 Co...
A.Final ProjectTeamProjectCustom Schema: 200 points Extra Credit Group of 3 people : Designer and Developer ( ERD, tables, data ) Team Leader/Power User ( Business Questions/Queries, Real Life...

Explain the basic logic behind the multiplier in words. Why does it require b, the marginal propensity

Question:

Step by Step Answer:

The multiplier works through consumer spending and disposable income When autonomous spend...View the full answer

Macroeconomics Principles And Policy

Students also viewed these Economics questions