Explain the multiplier intuitively. Why is it that an increase in planned investment of $100 raises equilibrium

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Explain the multiplier intuitively. Why is it that an increase in planned investment of $100 raises equilibrium output by more than $100? Why is the effect on equilibrium output finite? How do we know that the multiplier is 1/MPS?

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Principles of Macroeconomics

ISBN: 978-0134078809

12th edition

Authors: Karl E. Case, Ray C. Fair, Sharon E. Oster

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Question Posted: Dec 27, 2018 06:41 AM

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Explain the multiplier intuitively. Why is it that an increase in planned investment of $100 raises equilibrium

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Think of the adjustment that occurs when with the economy at the equilibrium leve...View the full answer

Principles of Macroeconomics

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