ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Multiplier is estimated as:
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Explanation:
Detailed explanation-1: -Therefore, the value of the multiplier is infinity.
Detailed explanation-2: -The factor 1/(1 − MPC) is called the multiplier. If a question tells you that the multiplier is 2.5, that means: Change in GDP = 2.5 × Change in AD. 1. If your consumption increases from $30, 000/yr to $40, 000/yr when your disposable income increases from $84, 000 to $96, 500/yr, calculate your MPC.
Detailed explanation-3: -The formula to determine the multiplier is M = 1 / (1-MPC). Once the multiplier is determined, the multiplier effect, or amount of money needed to be injected into an economy, can also be determined. This amount is calculated by dividing the total amount of spending needed by the multiplier.
There is 1 question to complete.