ECON 101 Lecture : Multipliers and Multiplier Math

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brenda98434

4 Dec 2022

School

Duke University

Department

Economics

Course

ECON 101

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What happens to ad orshortrun gdp when a variable affecting. Parameters like mpempi tax rate changes or one of the ex suppose. I rises by 2006 short run gdp what happens to ad one approach calculate ad w the oldvalue of. Wthe new value t note the change in ad another approach find the short cut. Ad to changes in one of these variables or parameters. I formula relating changes in t ve callalate. Then by di t di investmentmuthpier"t in investment r its valid for a change we can find multipliers by dz for any in the ad function. If we know themultiplier formula we don"t have to recalculate. Adeverytime a variablesvalues changes formulas for the multiples are very similar are related to the short run gdp calculation to eachother r. This method of finding multipliers works components of ad but not theparamaters like mpc mpi tax rate for the autonomous.

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Assume an autonomous shock or change to an exogenous economic variable, such as a change in government taxation or spending, the demand for exports, or foreign direct investment flow into the country. What happens to the equilibrium GDP? What is the relationship between the initial change and the overall change to GDP? How does your answer relate to the output multiplier?

carminerat36

Calculate the government-taxation multiplier for each marginal propensity to consume. Instructions: Round your answers to two decimal places.

a. The marginal propensity to consume (MPC) = 0.2, and the government spending multiplier is 1.25. The taxation multiplier is ?.

b. The marginal propensity to consume (MPC) = 0.5, and the government spending multiplier is 2.00. The taxation multiplier is ?.

c. The marginal propensity to consume (MPC) = 0.8, and the government spending multiplier is 5.00. The taxation multiplier is ?.

d. What do your results imply about the relative strength of changes in government spending versus changes in taxation for fiscal policy, all else equal?

i. Changes in government spending will have an indeterminate effect on GDP and income compared to changes in taxes.

ii. Changes in government spending will have a bigger effect on GDP and income than will changes in taxes.

iii. Changes in government spending will have an equal effect on GDP and income compared to changes in taxes.

iv. Changes in government spending will have a smaller effect on GDP and income than will changes in taxes.

mauvetrout59

The multiplier, or the change in equilibrium GDP that will occur per any change in spending, can be determined by calculating the fraction of any change in income that survives all of the leakages and goes on to start the next round of spending. That is, the multiplier depends upon the fraction of any change in income that becomes...

		the change in exports
		the change in savings
		the change in imports
		the change in domestic consumer spending
		the change in disposable income
		the change in business investment spending

peachkangaroo256

ECON 101 Lecture : Multipliers and Multiplier Math

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