Since MPC+MPS=1 Then MPS=1-0.5=0.5 Tax Multiplier= -(MPC/MPS)=-0.5/0.5= -1
1.33The answer is 1.33
100
1/1-MPC or 1/MPS+MPT+MPM
MPC is the Marginal Propensity to Consume. You can find the MPC by taking the change in consumption divided by the change in disposable income. Likewise, MPS is the Marginal Propensity to Save. You can find the MPS by taking the change in savings divided by the change in disposable income. It is useful to know when you want to find out what the multiplier is. Multiplier = 1/MPS or 1/(1-MPC)
Since MPC+MPS=1 Then MPS=1-0.5=0.5 Tax Multiplier= -(MPC/MPS)=-0.5/0.5= -1
Taxation Multiplier = - (MPC) / (1 - MPS) Where, MPC = marginal propensity to consume, and MPS = marginal propensity to save.
The formula for this simple tax multiplier. (m[tax]), is: m[tax] = - MPC x 1 ---- MPS = - MPC ---- MPS Where MPC is the marginal propensity to consume and MPS is the marginal propensity to save. This formula is almost identical to that for the simple expenditures multiplier. The only difference is the inclusion of the negative marginal propensity to consume (- MPC). If, for example, the MPC is 0.75 (and the MPS is 0.25), then an autonomous $1 trillion change in taxes results in an opposite change in aggregate production of $3 trillion.
you could do it two ways .If you have the MPC could divide it
If the full multiplier for G (i.e. ignoring crowding out effects) is = change in G/Multiplier Then the tax multiplier is = change in T x marginal propensity to consume/multiplier since the mpc is between 0 and 1 the tax multiplier is less. Intuitively it is not difficult to see why, the change tax enters spending decisions through consumption and consumption is dependant on the mpc. Whereas as G affects spending decisions directly - it is a injection into the economy that does not have to work through some indirect source to have an effect on the economy.
1.33The answer is 1.33
3.00
MPS =0.401 mpc = 0.509
K= I/(1-MPC) MPC is a marginal propensity to consume I = investment
100
1/1-MPC or 1/MPS+MPT+MPM
MPC is the Marginal Propensity to Consume. You can find the MPC by taking the change in consumption divided by the change in disposable income. Likewise, MPS is the Marginal Propensity to Save. You can find the MPS by taking the change in savings divided by the change in disposable income. It is useful to know when you want to find out what the multiplier is. Multiplier = 1/MPS or 1/(1-MPC)