Households decide to spend less of each extra dollar they earn (the MPC is lower). Consider...

Transcribed Image Text:

Households decide to spend less of each extra dollar they earn (the MPC is lower). Consider the multiplier process. This change means that when households get extra income, they save a percentage and spend a percentage. Therefore, in each stage of the multiplier process, when new comes into households, of it is used for spending in the circular flow. As a result, the extra spending and therefore new in the second round and third round and subsequent rounds of the multiplier process is Therefore, the multiplier is larger smaller less more spending saving income Households decide to spend less of each extra dollar they earn (the MPC is lower). Consider the multiplier process. This change means that when households get extra income, they save a percentage and spend a percentage. Therefore, in each stage of the multiplier process, when new comes into households, of it is used for spending in the circular flow. As a result, the extra spending and therefore new in the second round and third round and subsequent rounds of the multiplier process is Therefore, the multiplier is larger smaller less more spending saving income

Answer rating: 100% (QA)

Households decide to spend less of each extra dollar they earn the MPC is lower ... View the full answer