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    1/.75 1.3. 1/ (1-.75) 1/.25, 1/.25 4 So MPS Decreases and Multiplier Increases

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    blon majors
    The document discusses marginal propensity to consume (MPC) and marginal propensity to save (MPS) in relation to changes in spending, taxes, and the multiplier effect. It provides examples of calculating MPS and multipliers based on given MPC values. It also analyzes how changes in MPC impact MPS and multipliers, and calculates total effects on the economy from changes in government spending, business investment, household spending, taxes, and other factors based on known MPC values and multipliers.

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    1/.75 1.3. 1/ (1-.75) 1/.25, 1/.25 4 So MPS Decreases and Multiplier Increases

    Uploaded by

    blon majors
    22 views2 pages
    The document discusses marginal propensity to consume (MPC) and marginal propensity to save (MPS) in relation to changes in spending, taxes, and the multiplier effect. It provides examples of calculating MPS and multipliers based on given MPC values. It also analyzes how changes in MPC impact MPS and multipliers, and calculates total effects on the economy from changes in government spending, business investment, household spending, taxes, and other factors based on known MPC values and multipliers.

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    MPCworksheet (2)

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    The document discusses marginal propensity to consume (MPC) and marginal propensity to save (MPS) in relation to changes in spending, taxes, and the multiplier effect. It provides examples of calculating MPS and multipliers based on given MPC values. It also analyzes how changes in MPC impact MPS and multipliers, and calculates total effects on the economy from changes in government spending, business investment, household spending, taxes, and other factors based on known MPC values and multipliers.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    22 views2 pages

    1/.75 1.3. 1/ (1-.75) 1/.25, 1/.25 4 So MPS Decreases and Multiplier Increases

    Uploaded by

    blon majors
    The document discusses marginal propensity to consume (MPC) and marginal propensity to save (MPS) in relation to changes in spending, taxes, and the multiplier effect. It provides examples of calculating MPS and multipliers based on given MPC values. It also analyzes how changes in MPC impact MPS and multipliers, and calculates total effects on the economy from changes in government spending, business investment, household spending, taxes, and other factors based on known MPC values and multipliers.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    If the marginal propensity to consume (MPC) is .

    5, what is the marginal propensity to save


    (MPS)? Answer: MPC + MPS = 1; .5 + MPS = 1; MPS = .5
    If the marginal propensity to consume is .25, what is the marginal propensity to save?

    If the marginal propensity to consume is .8, what is the marginal propensity to save?

    If the marginal propensity to consume is .9, what is the marginal propensity to save?

    Marginal propensity to consume goes from .25 to .75, did the MPS increases/decreases (circle
    one) and the multiplier increases/decreases (circle one). Answer: 1/(1-MPC); 1/(1-.25)=1/.75;
    1/.75=1.3. 1/(1-.75)=1/.25, 1/.25=4 so MPS decreases and multiplier increases
    Marginal propensity to consume goes from .5 to .9, did the MPS increases/decreases (circle
    one) and the multiplier increases/decreases (circle one).

    Marginal propensity to consume goes from .5 to .8, did the MPS increases/decreases (circle
    one) and the multiplier increases/decreases (circle one).

    Marginal propensity to consume goes from .33 to .75, did the MPS increases/decreases (circle
    one) and the multiplier increases/decreases (circle one).

    Marginal propensity to consume goes from .8 to .5, did the MPS increases/decreases (circle
    one) and the multiplier increases/decreases (circle one).

    Marginal propensity to consume goes from .75 to .5, did the MPS increases/decreases (circle
    one) and the multiplier increases/decreases (circle one).

    Marginal propensity to consume goes from .9 to .25, did the MPS increases/decreases (circle
    one) and the multiplier increases/decreases (circle one).

    Marginal propensity to consume goes from .75 to .33, did the MPS increases/decreases (circle
    one) and the multiplier increases/decreases (circle one).

    Marginal propensity to consume is .9, people change their spending behavior, and it goes to .
    75. What is the new marginal propensity to save and the new multiplier? Answer:
    1/(1-.75)=1/.25, 1/.25=4. So MPS is .25 and multiplier is 4
    Marginal propensity to consume is .5, people change their spending behavior, and it goes to .8.
    What is the new marginal propensity to save and the new multiplier?

    Marginal propensity to consume is .8, people change their spending behavior, and it goes to .5.
    What is the new marginal propensity to save and the new multiplier?

    Marginal propensity to consume is .9, people change their spending behavior, and it goes to .5.
    What is the new marginal propensity to save and the new multiplier?
    Marginal propensity to consume is .25, people change their spending behavior, and it goes to .
    5. What is the new marginal propensity to save and the new multiplier?

    Marginal propensity to consume is .5, people change their spending behavior, and it goes to .9.
    What is the new marginal propensity to save and the new multiplier?

    The MPC to consume is .5 and the government increases spending by $1 billion. What is the
    total impact on the economy? Answer: 1/(1-.5)=1/.5, 1/.5=2. $1B X 2= $2B
    The MPC to consume is .8 and business increases investments by $100 million. What is the
    total impact on the economy?

    The MPC to consume is .9 and households increases spending by $10 billion. What is the total
    impact on the economy?

    The MPC to consume is .5 and the government decreases spending by $100 billion. What is
    the total impact on the economy? Answer:1/(1-.5)=1/.5, 1/.5=2. -$100B x 2= -$200B
    The MPC to consume is .75 and businesses decrease investment by $25 million due to raised
    interest rates. What is the total impact on the economy?

    The MPC to consume is .8 and households decrease spending by $1 billion due to future
    expectation of recession. What is the total impact on the economy?

    Government increases taxes by $1 billion and the MPC is .75. What is the impact on the
    economy? Answer: increase taxes take $$$ out of economy. Also, tax multiplier is the spending
    multiplier minus 1. The theory is taxes have lower impact on economy than spending. So, 1/(1-.75)=1/.25,
    1/.25=4 (spending multiplier), 4-1=3,-$1B x 3= -$3B. The tax increase took money out of economy by
    $3B.
    Government increases taxes by $100 million and the MPC is .9. What is the impact on the
    economy?

    Government increases taxes by $10 billion and the MPC is .8. What is the impact on the
    economy?

    Government decreases taxes by $25 million and the MPC is .5. What is the impact on the
    economy? Answer: Decreasing taxes adds $$$ into the economy. 1/(1-.5)=1/.5, 1/.5=2, 2-1=1, $25M x
    1= $25M. So, $25M was put into the economy to expand the economy via tax cuts.
    Government decreases taxes by $12 billion and the MPC is .8. What is the impact on the
    economy?

    Government decreases taxes by $8 million and the MPC is .75. What is the impact on the
    economy?

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