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1. What is the multiplier effect?

2. What relationship does the PC bear to the size of the multiplier and the MPS?

3. What will the multiplier when the MPS is 0.4, 0.6, 1,½, and 0?

4. How much of a change in the economy will result if businesses increase their level of investment by $8 Billion and the MPC in the economy is 4/5 and if it is 2/3

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Chika Ilonah
Chika IlonahLv10
28 Sep 2019

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Related questions

What will the multiplier be when the MPS is 0, .4, .6, and 1? What will it be when the MPC is 1, .90, .67, .50 and 0? How much of a change in GDP will result if firms increase their level of investment by $8 billion and the MPC is .80? If the MPC instead is .67?

Question 01

A firm pays in cash $250000 in wages,$55430 in interest on borrowed money capital and $74320 for the yearly rental of its factory building. If the entrepreneur worked for somebody else as a manager, he would earn at most $44500peryear and if he lent out his money capital to somebody else in a similarly risky business, he would at most receive $16600 per year. Keeping in view the above information:

(A) Calculate:

a) The explicit cost of the firm.

b) The implicit cost of the firm.

c) The total cost of the firm.

(B) If the entrepreneur received $495680 from selling his year's output, then calculate his total profit.

(C) What will be the total profit if the entrepreneur's total revenue were $413934 instead?

Question 02

(A) Find the value of multiplier if:

a)MPC = 0.39

b)MPS = 0.64

(B) If the value of the multiplier is 2.49 then find out:

a)MPC

b)MPS

(C) What is the relationship between the value of multiplier and MPC?

(D) Find the change in the equilibrium level of output when there is a $25 increase in investment spending and the PC is 0.75.

Question01

A firm pays in cash $250000 in wages, $55430ininterest on borrowed money capital and $74320 for the yearly rental of its factory building. If the entrepreneur worked for somebody else as a manager, he would earn at most $44500 per year and if he lent out his money capital to somebody else in a similarly risky business, he would at most receive $16600 per year. Keeping in view the above information:

(A)Calculate:

a)The explicit cost of the firm.

b)The implicit cost of the firm.

c)The total cost of the firm.

(B)If the entrepreneur received$495680 from selling his year's output, then calculate his total profit.

(C)What will be the total profit if the entrepreneur's total revenue were $413934 instead?

(Marks: A = 2+2+2, B = 2, C=2)

Question02

(A)Find the value of multiplier if:

a)MPC = 0.39

b)MPS = 0.64

(B)If the value of multiplier is2.49 then finds out:

a)MPC

b)MPS

(C)What is the relationship between the value of multiplier and MPC?

(D)Find the change in the equilibrium level of output when there is a $25 increase in investment spending and the MPC is0.75.

(Marks: A = 3, B = 3, C =1, D =3)

 

 

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