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Economics for Today 9th Edition by Irvin Tucker
Edition 9ISBN: 978-1305507111Economics for Today 9th Edition by Irvin Tucker
Edition 9ISBN: 978-1305507111 Exercise 26
How are changes in the MPC, changes in the MPS, and the size of the multiplier related? Answer the following questions:
a. What is the multiplier if the MPC is 0? 0.33? 0.90?
b. Suppose the equilibrium real GDP is $100 billion and the MPC is 4/5. How much will the equilibrium output change if businesses increase their level of investment by $10 billion?
c. Using the data given in question 5(b), what will be the change in equilibrium real GDP if the MPC equals 2/3?
a. What is the multiplier if the MPC is 0? 0.33? 0.90?
b. Suppose the equilibrium real GDP is $100 billion and the MPC is 4/5. How much will the equilibrium output change if businesses increase their level of investment by $10 billion?
c. Using the data given in question 5(b), what will be the change in equilibrium real GDP if the MPC equals 2/3?
Explanation
Verified
Verified
a) We know that, 
Here, MPC = 0 (Given) ...
Economics for Today 9th Edition by Irvin Tucker
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