Suppose there is a $200 billion recessionary ga
What will be an ideal response?
The expenditure multiplier is equal to 1/(1 - MPC). So, with a marginal propensity to consume of 0.75, the expenditure multiplier is 1/(1 - 0.75 ) = 1/0.25, which is 4. Dividing the size of the recessionary gap, $200 billion, by 4 shows that government expenditure needs to be changed by $50 billion to restore the economy back to potential GDP. Because a recessionary gap occurs when real GDP is less than potential GDP, real GDP needs to increase in order for it to equal potential GDP. So, because real GDP needs to be increased, government expenditure needs to be increased.
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Explain how the following will affect the supply curve of coffee
a) A fall in the wages paid to coffee workers b) An increase in the availability of high-yielding coffee plants c) A decrease in the quantity of land under coffee cultivation What will be an ideal response?
If the price of good A falls, it will: a. increase a consumer's total utility from the consumption of that good
b. increase a consumer's marginal utility from consuming the last unit of that good. c. decrease a consumer's marginal utility from consuming the last unit of that good. d. do both (a) and (c).