Which of the following is the formula for the multiplier?

Advanced Placement (AP)

1 answer:

Goryan [66]8 months ago

3 0

The formula to determine the multiplier(M) is:

M = 1 / (1 – MPC)

where:

MPC=Marginal propensity to consume

What Is a Multiplier?

A multiplier is a broad term in economics that refers to an economic factor that, when increased or changed, causes increases or changes in many other related economic variables. In terms of GDP, the multiplier effect causes total output gains to be greater than the change in spending that caused it.

Typically, the term multiplier refers to the relationship between government spending and total national income. The deposit multiplier is another multiplier used to explain fractional reserve banking.

Often the multiplier formula is considered to be too simple because it ignores some real-world complications. The Reason is:

Option A. The formula ignores the impact of an increase in GDP on consumption.

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6 0

3 years ago

Questions attached below.

luda_lava [24]

No, the price paid by the consumers for the quantity of jet planes will not increase by the same amount as the tax

(a) A correctly labelled graph for demand and supply for jet planes is attached

(b) The solution to the whole of the questions given here is mentioned in the graph attached

(c) Calculating the producer surplus:

Producer surplus = Total Revenue ( TR ) - Total cost ( TC )

Where Total Cost = Cost Average ( AC) * quantity,q

TR = $2000 * 50 = $100,000

TC = $1000 * 50 = $50,000

Product surplus = $10,000 - $50,000 = $50,000

(d) No, the price paid by the consumers for the quantity of jet planes will not increase by the same amount as the tax

(e) In the market for jet planes, the loss in consumer and producer supply will balance than the tax revenue collected by the government as tax

<h3>What is demand and supply?</h3>

Demand simply refers to the quantity of consumers who are willing and able to buy particular products at various prices during a given period of time.

However, supply on the other hand, is a fundamental economic concept which describes the total amount of a specific goods or services that is available to consumers.

So therefore, in the market for jet planes, the loss in consumer and producer supply will balance than the tax revenue collected by the government as tax

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