question archive Consider a closed economy in which the marginal propensity to consume is 0
Consider a closed economy in which the marginal propensity to consume is 0
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Consider a closed economy in which the marginal propensity to consume is 0.50. a. What is the spending multiplier for this economy (AY*/AE,)? b. All else equal, how would autonomous expenditure be affected (up or down, and by how much) by a 200 unit increase in government purchases? How would the equilibrium value of income be affected? c. All else equal, how would autonomous expenditure be affected (up or down, and by how much) by a 200 unit increase in taxes (T)? How would the equilibrium value of income be affected? d. All else equal, how would autonomous expenditure be affected (up or down, and by how much) by simultaneous 200 unit increases in taxes (T) and government purchases (G)? How would the equilibrium value of income be affected?
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