List and explain factors that determine the size of the expenditure multiplier in the expenditure model when prices are constant
What will be an ideal response?
The size of the expenditure multiplier depends on three factors: the marginal propensity to consume, the marginal propensity to import, and the marginal income tax rate. The larger the marginal propensity to import and the larger the marginal tax rate, the smaller the multiplier. These two factors work to decrease the size of the multiplier because imports reduce spending on U.S. produced products and income taxes reduce the impact of a change in real GDP on consumption expenditure. On the other hand, the larger the marginal propensity to consume, the larger the multiplier.
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What will be an ideal response?
The expression "There's no such thing as a free lunch" means
A) each person must pay for exactly what he or she receives. B) when scarce resources are used to produce one good they are unavailable to produce others. C) you cannot have a free lunch at the expense of someone else. D) if one person gains, someone else must lose.
Which of the following is an example of an agency concerned with social regulation?
A) Federal Communications Commission B) Securities and Exchange Commission C) Consumer Product Safety Commission D) Federal Energy Regulatory Commission
A decrease in government spending will cause a(n):
A. Increase in the quantity of real output demanded B. Decrease in the quantity of real output demanded C. Decrease in aggregate demand D. Increase in aggregate demand