The effect is exactly the same as the multiplier for intended investment that we discussed in Chapter 9
What will be an ideal response?
The initial change in government spending (?G) becomes income to individuals (?Y), which leads to a round of consumer spending (?C) equal to (mpc?Y), which in turn becomes income to other individuals, leading to another round of consumer spending, and so forth. The whole process can be summarized using the same formula as in Chapter 9, but now applied to government spending rather than intended investment: ? Y =1/1-mpc?G or: ?Y = mult ?G
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Which of the following are explanations for sticky prices?
a. long-term labor contracts b. fixed exchange rates c. flexible exchange rates d. fixed money supply
An increase in the price of inputs will cause the supply curve for a product to shift to the right
Indicate whether the statement is true or false