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Few macroeconomics questions. What effect will an increase in the marginal propensity to save have on the ZZ line and output When the economy is in eqbm does G equal T?
Scott1389
the ZZ line will become steeper and a given change in autonomous consumption to have a larger effect on output
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∙ 11y ago
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Why do you care about marginal propensity to consume?
we do care about the marginal propensity to consume because it shows the ratio of an increase in consumption due to increase in income it does not matter what the income of the consumer,either high or low.
What are the significances of Marginal Propensity to Consume?
The marginal propensity to consume (MPC) is an economic concept to show the increase in personal consumer spending or consumption that occurs with an increase in disposable income. Here is the formula: MPC = change in consumption/change in disposable income A change in disposable income results in the new income either being spent or saved. This is the Marginal Propensity to Consume (MPC) or the Marginal Propensity to Save (MPS). MPC + MPS = 1
If Marginal propensity to consume of 06 and a marginal propensity to import of 02 the government increases its spending by 2 billion and raises taxes by 1 billion what happens to equilibrium income?
The equilibrium income would increase 1.06 billion dollars.
If the consumption function is C50 0.75y then the marginal propensity to consume is?
If the consumption function is C50 0.75y then the marginal propensity to consume is?
What is the formula of the marginal propensity to withdraw?
MPW (Marginal Propensity to Withdraw) = Marginal Propensity to Save (MPS) + Marginal propensity to tax (MPT)+ Marginal Propensity to Import (MPM)MPS (proportion of additional income that is saved)=a change in Savings/ a change in National incomeMPT (Proportion of additional income that is taxed)=a change in Taxation/ a change in National incomeMPM (the proportion of additional income that is spent on imports)=a change in imports/ a change in National income
Why do you care about marginal propensity to consume?
we do care about the marginal propensity to consume because it shows the ratio of an increase in consumption due to increase in income it does not matter what the income of the consumer,either high or low.
What are the significances of Marginal Propensity to Consume?
The marginal propensity to consume (MPC) is an economic concept to show the increase in personal consumer spending or consumption that occurs with an increase in disposable income. Here is the formula: MPC = change in consumption/change in disposable income A change in disposable income results in the new income either being spent or saved. This is the Marginal Propensity to Consume (MPC) or the Marginal Propensity to Save (MPS). MPC + MPS = 1
If Marginal propensity to consume of 06 and a marginal propensity to import of 02 the government increases its spending by 2 billion and raises taxes by 1 billion what happens to equilibrium income?
The equilibrium income would increase 1.06 billion dollars.
If the consumption function is C50 0.75y then the marginal propensity to consume is?
If the consumption function is C50 0.75y then the marginal propensity to consume is?
What is the formula of the marginal propensity to withdraw?
MPW (Marginal Propensity to Withdraw) = Marginal Propensity to Save (MPS) + Marginal propensity to tax (MPT)+ Marginal Propensity to Import (MPM)MPS (proportion of additional income that is saved)=a change in Savings/ a change in National incomeMPT (Proportion of additional income that is taxed)=a change in Taxation/ a change in National incomeMPM (the proportion of additional income that is spent on imports)=a change in imports/ a change in National income
What formula is used for the multiplier in an open economy?
1/1-(mpc-mpm) mpc- marginal propensity to consume mpm- marginal propensity to import
How can you derive the tax rate multiplier?
Taxation Multiplier = - (MPC) / (1 - MPS) Where, MPC = marginal propensity to consume, and MPS = marginal propensity to save.
Distinguish between average propensity to consume and marginal propensity to consume?
average propensity to consume is the fraction of the total amount of disposable income that households spend on consumption whereas marginal propensity to consume is the amount that consumption increases for every additional dollar of disposable income.
How could weistinguish between average propensity to consume from marginal propensity to consume?
The average propensity to consume is the fraction of total disposable income that households spend on consumption (as opposed to saving for example) whereas marginal propensity to consume is the additional consumption that results from an additional dollar of disposable income.
If the marginal propensity to consume is 0.75. what would be the multiplier?
4.
What is multiplier and explain the working of it?
Multilplier is the ratio by which a given increase in investment brings about an increase in the national income. The extent of the increase in income ranges from 1 to infinity depending on the mariginal propensity to consume (MPC) and marginal propensity to save (MPS). Multiplier is symbolised by the aphabet "K" and its value is calculated as under:1 1K = ------------------------- = -----------------------1-MPC MPSIf MPC =1, K = infinity and if MPC = 0, K = 1 and in between there are numerous ratios, depending on the data in a question.Multiplier can also be defined as the reciprocal of marginal propensity to save because K = 1/MPS
If there us an increase in the level of uncertainty within the economy what is likely to happen to the marginal propensity to consume and why?
The MPC will decrease as people save more due to fear of income reduction.
