Multiplier fun !! (1 Viewer)

[mmmmmm]

Hey Guys, this is from leading edge, just wanted to check I'm on the right track

S = 50 G = 30 X = 10 M =10 C = 40 I = 15
MPC = 0.8

Calculate the level of aggregate demand in the above economy. If the govt wanted to increase national income by 2.5 million, by how much would it have to increase its spending levels?

(I really think my answers way off .. I'd appreciate your help - plus it's good for you )

 

[LaZy_KoReAn]

I prefer not to answer, so i don't make a fool of myself if i get it wrong

 

[loser]

Where's this question from?

 

[mmmmmm]

Our text book .. someone must be able to answer it !

 

[kt san]

since k is one over MPS
which is one over 0.2
which is 5
so k is 5
multiplier effect is increase in income times K
for increase in nat income of 2.5, that's 2.5 divided by K
so i'll be 0.5 mil

 

[Minai]

thats correct, kt san

hey, good practice for me too..i have my macro exam on friday

 

[truly-in-bliss]

best of luck!