Using the same mpc and multiplier as before (we had chosen the example where mpc = 0.8, resulting in mult = 5)
What will be an ideal response?
allows us to predict the impact of government spending on economic equilibrium. The multiplier applies to government spending in exactly the same way that it does to changes in intended investment. Therefore an increase in government spending of 80 leads to an equilibrium shift of 80 3 5 = 400. Looking at it the other way, if we start with the goal of an increase of 400 in Y, we can divide 400 by 5 to find the needed quantity of ?G: 400/5 = 80. (chapter 10 page 231)
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Which of the following is NOT an example of the opportunity cost of investing in human capital?
A) lost wages while in school B) lost wages while in on-the-job training C) tuition payments D) apartment rent while working and going to school part-time
Which of the following is an example of external debt for the United States?
A) A purchase of Apple stock by a person in Canada B) A loan made in yen to a company in the United States C) A loan made by Citibank to the government of Mexico D) A purchase of U.S. Treasury bills by the Bank of Japan