In each of the following cases, calculate the change that occurs in the level of output as

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In each of the following cases, calculate the change that occurs in the level of output as a result of the multiplier effect.

a. Government purchases of goods and services increase by $600 million, and 20 percent of additional income received is not spent.

b. Household spending from borrowing declines by $1 billion, and 30 percent of additional income received is not spent.

c. Investment spending increases by $800 million, and 75 percent of additional income received is spent.

d. Investment spending increases by $20 billion at the same time that U.S. net exports decrease by $15 billion, and 60 percent of additional income received is spent.

e. Household purchases from transfer payments increase by $500 million when the economy is at full employment, and two-thirds of additional income received is spent.

f. Government purchases decrease by $200 million and transfer payments increase by $100 million when people are spending 75% of income received.

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Economics Theory And Practice

ISBN: 9781118949733

11th Edition

Authors: Patrick J. Welch, Gerry F. Welch

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