ECONOMICS
AGGREGATE DEMAND
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]


5


4


1


4


5

Detailed explanation1: Therefore, the multiplier is 5 – which means the initial $1 million investment would provide a $5 million stimulus to the wider economy.
Detailed explanation2: 9, multiplier = 10; MPC = . 67; multiplier = 3; MPC = . 5, multiplier = 2; MPC = 0, multiplier = 1.
Detailed explanation3: Interestingly, the tax multiplier is always smaller than the expenditure multiplier by exactly 1. So if the expenditures multiplier is 4, the tax multiplier is 3 and if the expenditures multiplier is 10, the tax multiplier is 9.
Detailed explanation4: How is the tax multiplier calculated? The tax multiplier is calculated using a variable called MPC (marginal propensity to consume), which is the percentage of an increase in income that is spent. Tax multiplier is then calculated using the formula:MPC/(1MPC).