Suppose, the marginal propensity to consume (mpc) of the United States is 0.65. increment Y equals fraction numerator 1 over denominator 1 minus m p c end fraction increment G semicolon space space m p c plus m p s equals 1 semicolon space m u l t i p l i e r space e f f e c t equals fraction numerator 1 over denominator 1 minus m p c end fraction equals fraction numerator 1 over denominator m p s end fraction

A. Calculate the marginal propensity to save (mps) and the multiplier effect.

B. Suppose the US government has increased spending by 5 million USD. Could you find out the change in US income level?

C. Would you support the expansionary fiscal policy (i.e., a combination of increased federal spending and decreased taxes)? Why or Why not?

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