Consider a hypothetical closed economy in which households spend $0.60 of each additional dollar they earn and
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Consider a hypothetical closed economy in which households spend $0.60 of each additional dollar they earn and save the remaining $0.40.
The marginal propensity to consume (MPC) for this economy is, and the spending multiplier for this economy is______.
Suppose the government in this economy decides to increase government purchases by $400 billion.
The increase in government purchases will lead to an increase in income, generating an initial change in consumption equal to _________ .
This increases income yet again, causing a second change in consumption equal to _______ .
The total change in demand resulting from the initial change in government spending is _______.
Related Book For
Economics Principles and Policy
ISBN: 978-1305280595
13th edition
Authors: William Baumol, Alan Blinder
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