In each of the following cases, calculate the change that occurs in the level of output as
Question:
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.
Step by Step Answer:
Economics Theory And Practice
ISBN: 9781118949733
11th Edition
Authors: Patrick J. Welch, Gerry F. Welch