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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Hello. The answer to your question is B
hope this helps :)
According to the result of the test statistic, the p-values are given by:
a) 0.0352.
b) 0.9648.
c) 0.0704.
<h3>How to find the p-value of a test?</h3>
It depends on the test statistic z, as follows.
- For a left-tailed test, it is the area under the normal curve to the left of z, which is the <u>p-value of z</u>.
- For a right-tailed test, it is the area under the normal curve to the right of z, which is <u>1 subtracted by the p-value of z.</u>
- For a two-tailed test, it is the area under the normal curve to the left of -z combined with the area to the right of z, hence it is <u>2 multiplied by 1 subtracted by the p-value of z.</u>
In this problem, the test statistic is z = 1.8, which has a p-value of 0.9648.
Item a:
Right-tailed test, hence the p-value is of 1 - 0.9648 = 0.0352.
Item b:
Left-tailed test, hence the p-value is of 0.9648.
Item c:
Two-tailed test, hence the p-value is of 2 x (1 - 0.9648) = 2 x 0.0352 = 0.0704.
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