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12345 [234]
1 year ago
5

If $1,000 of additional spending occurs and the marginal propensity to consume is 0.8, the total effect on the economy is an inc

rease of _____ in income or output.
Business
1 answer:
maks197457 [2]1 year ago
6 0

If $1,000 of additional spending occurs and the marginal propensity to consume is 0.8, the total effect on the economy is an increase of $5000 in income or output

In economics, the marginal propensity to consume (MPC) is defined as the proportion of an aggregate raise in pay that a consumer spends on the consumption of goods and services, as opposed to saving it. Marginal propensity to consume is a component of Keynesian macroeconomic theory and is calculated as the change in consumption divided by the change in income.

MPC is depicted by a consumption line, which is a sloped line created by plotting the change in consumption on the vertical "y" axis and the change in income on the horizontal "x" axis.

Multiplier = 1 / (1 - MPC)

MPC = Marginal propensity to consume = 0.8

So,

Multiplier = 1 / (1 - 0.8)

=> Multiplier = 5

Changes in income or output = Multiplier * Changes in spending

=> Changes in income or output = 5 * 1,000

=> Changes in income or output = $5,000

Therefore, here the income or output increases by $5,000 in the economy.

Learn more about Marginal propensity here

brainly.com/question/19089833

#SPJ4

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3 years ago
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3 years ago
What is the role of the Federal Reserve in the U.S. economy?
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Answer: The correct answer:

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1 year ago
If bonds for Crayon Corporation, with a face value of $150,000, are converted into common stock when the carrying value of the b
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Explanation:

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To wirte-off the account we need to post them in the other side so we got:

Bonds payable debit 150,000 debit

       Discount on bonds         15,000 credit

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These makes option C correct

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I hope this helps
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Read 2 more answers
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