Define the multiplier. How is it related to real GDP and the initial change in spending? How can the multiplier have a negative effect?
What will be an ideal response?
The multiplier is simply the ratio of the change in real GDP to the initial change in spending. Multiplying the initial change in spending by the multiplier gives you the amount of change in real GDP. The multiplier effect can work in a positive or a negative direction. An initial increase in spending will result in a larger increase in real GDP, and an initial decrease in spending will result in a larger decrease in real GDP.
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Who would the BLS count as unemployed? The person who
A) searches for a job after retiring from the military. B) quits work and intends to stay at home raising his kids. C) was fired from work and decides to attend college full time rather than seek work. D) is dissatisfied with her present job and spends hours reading the help-wanted ads.
Suppose Y = 100, P = 80, and V = 3.2. If Y rises to 105, and the inflation rate is 10 percent, what is the new value of M?
What will be an ideal response?