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When the household marginal propensity to consume (MPC) rises, the spending multiplier:

A. Also increase 

B. Decrease 

C. Remain unchanged. 

D. Change unpredictably 

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Insha Fatima
Insha FatimaLv10
2 Nov 2020

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Related questions

Calculate the government-taxation multiplier for each marginal propensity to consume. Instructions: Round your answers to two decimal places.

a. The marginal propensity to consume (MPC) = 0.2, and the government spending multiplier is 1.25. The taxation multiplier is ?.

b. The marginal propensity to consume (MPC) = 0.5, and the government spending multiplier is 2.00. The taxation multiplier is ?.

c. The marginal propensity to consume (MPC) = 0.8, and the government spending multiplier is 5.00. The taxation multiplier is ?.

 

d. What do your results imply about the relative strength of changes in government spending versus changes in taxation for fiscal policy, all else equal?

i.   Changes in government spending will have an indeterminate effect on GDP and income compared to changes in taxes.

ii.  Changes in government spending will have a bigger effect on GDP and income than will changes in taxes.

iii. Changes in government spending will have an equal effect on GDP and income compared to changes in taxes.

iv. Changes in government spending will have a smaller effect on GDP and income than will changes in taxes.

If the marginal propensity to consume (mpc) is 0.80, the value of the spending multiplier is:

A. 2

B. 5

C. 1

D. 8

If the marginal propensity to consume (MPC) is 0.80, the value of the spending multiplier is:

a. 2

b. 5

c. 8

d. 10

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