Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Question 2 Ruth Langmore has recently been given an inheritance, and she decides to take this $250,000 of this money to invest in her
Question 2 Ruth Langmore has recently been given an inheritance, and she decides to take this $250,000 of this money to invest in her new business venture wither her brother, Wyatt Langmore. The marginal propensity to consume is currently 0.65. a) What is the spending multiplier? Carry out the calculation to four decimal places. b) What is the change in equilibrium/aggregate income? c) What would happen to equilibrium/aggregate income if Ruth and Wyatt decided to consume or spend the $250,000 instead of investing it? d) According to the lectures, what variables will be affected by the spending multiplier?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
a The spending multiplier M can be calculated using the formula M 1 1 MPC where MPC is the marginal ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started