1. 2. 3. 4. 5. Explain the relationship between the marginal propensity to consume, the spending multiplier, and aggregate spending by circling the word that completes the sentence. a. The higher the MPC, the ( higher / lower ) the MPS, the ( higher / lower ) the spending multiplier and the ( higher / lower ) the change in aggregate spending. b. The lower the MPC,the(higher / lower )the MPS,the( higher / lower )the spending multiplier and the( higher / lower )the change in aggregate spending. If the MP5 is .4, what is the spending multiplier? If the MPC is .75, what is the spending multiplier? Tax multiplier? Tax multiplier? Find the multiplier if a $1,200,000 decrease in investment expenditure resulted in a $2 million decrease in real GDP. If real GDP decreased by $10 billion and the multiplier is 2.5, find the initial change in aggregate demand (change in government spending). 6. Calculate the multiplier, changes in real GDP, and real GDP that occur for a given change in spending or taxation. NII'C MPS Change in spending or taxation $50 billion increase in Gov. spending Type of Multiplier (Spending, Tax or Balanced Budget) Multiplier (Calculate the multiplier) Effect on aggregate spending (Calculate the maydmum chan_e in on uut) $10 billion decrease in Gov. spending .25 $25 billion increase in personal taxation .25 $125 billion decrease in GOV. spending $50 billion decrease in business taxation $25 billion increase in Gov. spending and $25 billion inrrpnap in hpfcnnnl fnvnfin