IDNLearn.com connects you with a community of experts ready to answer your questions. Get the information you need quickly and accurately with our reliable and thorough Q&A platform.
Sagot :
Answer:
The amount by which each additional dollar of government spending increase output (Y) is 4.
Explanation:
Since you save 25% of each additional dollar of income, we therefore have:
MPS = Marginal propensity to save = 25%, or 0.25
Multiplier = 1 / MPS = 1 / 0.25 = 4
The multiplier is the amount by which each additional dollar of government spending will increase output (Y).
Therefore, the amount by which each additional dollar of government spending will increase output (Y) is 4.
Additional note:
This is not part of the requirement of the question but it is just for you to learn from.
Since we have:
Increase in government spending = $100
Therefore, we have:
Increase in output (Y) = Multiplier * Increase in government spending = 4 * $100 = $400
We appreciate every question and answer you provide. Keep engaging and finding the best solutions. This community is the perfect place to learn and grow together. Your questions find answers at IDNLearn.com. Thanks for visiting, and come back for more accurate and reliable solutions.
