List the reasons why the actual multiplier, which is estimated to be less than 2 for the U.S. economy, is much less than what the oversimplified formula suggests
The oversimplified formula:
1 . ignores variable imports, which reduce the size of the multiplier.
2 . ignores price-level changes, which reduce the size of the multiplier.
3 . ignores the income tax, which reduces the size of the multiplier.
4 . ignores the rising interest rates that accompany any autonomous increase in spending, which also reduce the size of the multiplier.
You might also like to view...
Which of the following is likely to happen due to quantitative easing by the Fed?
A) A rightward shift of the demand curve for bank reserves B) A leftward shift of the supply curve of bank reserves C) A leftward shift of the demand curve for bank reserves D) A rightward shift of the supply curve of bank reserves
What variable has been shown to be highly correlated with nutrition, disease, and income, and is increasingly being used by economists to measure the well being of people?
a. Height. b. Weight. c. IQ. d. Gender.
Market structure
a. has no influence on a firm's decision making b. applies only to industries regulated by the government c. is determined entirely by demand conditions in the industry d. influences the forms of competition among firms e. does not affect product price or quantity of output
Inferior goods have an income elasticity of demand that is
a. positive b. negative c. 0 d. greater than 1 in absolute value e. equal to 1 in absolute value