객관식
During a recession, how do automatic stabilizers affect tax revenue and government spending?
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19. Fiscal Policy
Government Purchases and the Multiplier Effect
객관식
How do you calculate the government spending multiplier?
A
1 - MPC
B
1 / (1 + MPC)
C
1 / (1 - MPC)
D
MPC / (1 - MPC)
검증된 단계별 안내1
Understand that the government spending multiplier measures how much total output (GDP) changes in response to a change in government spending.
Recall the marginal propensity to consume (MPC), which is the fraction of additional income that households spend on consumption.
Use the formula for the government spending multiplier, which is based on the idea that an initial increase in government spending leads to increased income, which then leads to further consumption and income increases.
The correct formula for the government spending multiplier is given by: \(\frac{1}{1 - MPC}\), where MPC is the marginal propensity to consume.
To calculate the multiplier, substitute the given MPC value into the formula and simplify to find the multiplier effect on GDP.
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