Refer to the information provided in Table 9.7 below to answer the questions that follow.
Table 9.7
All Numbers are in $ Million
-Refer to Table 9.7. The government spending multiplier in this economy is

Question

Refer to the information provided in Table 9.7 below to answer the questions that follow.
Table 9.7
All Numbers are in $ Million 
-Refer to Table 9.7. The government spending multiplier in this economy is

Quizplus · Accepted Answer

The government spending multiplier in this economy is calculated as 1/(1-MPC), where MPC is the marginal propensity to consume. In this case, MPC is 0.8 (given by the ratio of the change in consumption to the change in disposable income) so the multiplier is 1/(1-0.8)=5.

Refer to the Information Provided in Table 9