The effect is exactly the same as the multiplier for intended investment that we discussed in Chapter 9
What will be an ideal response?
The initial change in government spending (?G) becomes income to individuals (?Y), which leads to a round of consumer spending (?C) equal to (mpc?Y), which in turn becomes income to other individuals, leading to another round of consumer spending, and so forth. The whole process can be summarized using the same formula as in Chapter 9, but now applied to government spending rather than intended investment: ? Y =1/1-mpc?G or: ?Y = mult ?G
You might also like to view...
How nations benefit from trade?
Before the EEOC can take any action at all, it must receive a sworn complaint from an individual
Indicate whether the statement is true or false
In North Carolina, a car must pass an emissions test before it can be registered. The emissions test costs $20 per car. This system is an example of
a. direct controls on pollution. b. a per-unit emissions tax. c. a "license to pollute." d. subsidies for nonpollution.
A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is
a. inelastic. b. unit elastic. c. elastic. d. highly responsive to changes in income.