In an economy with an MPW of 0.67,taxes are decreased,causing an initial $10 billion change in the consumption of domestic items.As a result,aggregate demand eventually shifts:

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Quizplus · Accepted Answer

The marginal propensity to withdraw (MPW) is 0.67, meaning the marginal propensity to consume (MPC) is 0.33 (since MPC + MPW = 1). The multiplier effect is 1/(1-MPC) = 1/0.67 ≈ 1.49. The initial change in consumption is $10 billion, so the total shift in aggregate demand is $10 billion * 1.49 ≈ $15 billion to the right.

In an Economy with an MPW of 0