Posted by **Amber** on Thursday, December 10, 2009 at 2:50pm.

Assume the simple spending multiplier

equals 10. Determine the size and direction of any changes in the

aggregate expenditure line, real GDP demanded, and the aggregate

demand curve for each of the following changes in spending:

a. Spending rises by $8 billion at each income level.

b. Spending falls by $5 billion at each income level.

c. Spending rises by $20 billion at each income level.

- Macroeconomics -
**economyst**, Thursday, December 10, 2009 at 4:07pm
Use the multiplier. a) 8*10=80, b) -5*10=-50 and c) 20*10=200

Again, Am I missing something, some part of the problem, here?

- Macroeconomics -
**sylvia**, Monday, November 14, 2011 at 3:37pm
(Simple Spending Multiplier) Suppose that the MPC is 0.8, while investment, government purchases, and net exports sum to $500 billion. Suppose also that the government budget is in balance. a. What is the sum of saving and net taxes when desired spending equals real GDP? Explain. b. What is the value of the multiplier? c. Explain why the multiplier is related to the slope of the consumption function. Totally lost on how to figure this out. I think with an MPC of .8 the multiplier is 5, but I don't know where to go from there. Anjaree, thanks, but that much I knew. I don't know how to turn that knowledge into the answers.

Asked by Bruce Teague - Mon Jul 11 06:13:11 2011 - Economics - 2 Answers - Comments

A. The slope of the consumption function is MPC=0.8.Multiplier=1/1-MPC. Must I say that he slope of the consumption function is positively correlated with the multiplier.High MPC,high multiplier effects.

## Answer This Question

## Related Questions

- MACRO 2 ECON - 2.4 (Investment and the Multiplier) This chapter assumes that ...
- Macroeconomics - How would i approach this question? I don't necessarily want an...
- economics - some study guide questions i am stumped on 1 uncertainty about the ...
- Macro Consumption Question - (Simple Spending Multiplier) For each of the ...
- economics - With proportional income tax, a. The tax multiplier equals (MPC)(1-...
- econ 181 - 1. The three reasons for the downward slope of the aggregated demand ...
- economics - At an initial point on the aggregate demand curve, the price level ...
- Macroeconomics - Suppose the Fed wishes to use monetary policy to close an ...
- economics - What are the components of aggregate expenditure? In the model ...
- Macroeconomics - (Simple Spending Multiplier) Suppose that the MPC is 0.8, while...

More Related Questions