Using the multiplier, we can easily calculate the effect of further changes in government spending.

What will be an ideal response?

For example, suppose that government spending were reduced from 80 to 60. This negative change of 20 in G would lead to a change of (5 3 -20 = -100) in equilibrium Y. Income would fall from 800 to 700

Economics

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If the MPC = 0.80, the government purchases multiplier is

A) 2. B) 4. C) 5. D) 8.

Economics

The demand for a resource is derived from the demand for the final product it helps to produce

a. True b. False

Economics