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IgorLugansk [536]
3 years ago
8

If the MPC is 0.8 and a component of AD, such as Investment, is increased by $5, then the maximum amount of change in income and

output for the nation would be ___________ .
a. $20
b. $25
c. $50
d. $100
Business
1 answer:
SCORPION-xisa [38]3 years ago
6 0

Answer:

$25

Explanation:

The maximum amount by which the real GDP is expected to change for a given change in expenditure is known as the multiplier. Note that an economy is made of millions of economic agents interacting with one another. So expenditure made by one actor becomes an income in the hands of another who in turn spends a portion which becomes income to another and so on.

Marginal propensity to consume (MPC) represents the proportion of any extra income spent. For example, if my income increases by $100 and I only spent $70, then MPC is 0.7.

The multiplier depends on MPC. The multiplier is calculated as follows

Multiplier = 1/(1-MPC)

The multiplier in this question is therefore equals to 1/(1-0.8) = 5.

The maximum change expected in the real GDP is calculated as follows:

Maximum change change in GDP = Multiplier × change in expenditure

The maximum change in output for this question is

1/(1-0.8) × $5 = $25

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Answer:

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Explanation:

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3 0
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The journal entry to record employer payroll taxes owed affects ______.
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Answer:

a) liabilities only

Explanation:

The journal entry to record the payroll tax expense is shown below:

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The changes in account balances for Elder Company for 2018 are as follows: Assets $ 680,000 debit Common stock 350,000 credit Li
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Answer:

Net income will be $160000

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Explanation:

We have given debt common stock = $680000

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So net income = dividend paid + retained earning = $110000+$50000 = $160000

So option (c) will be the correct answer

4 0
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Answer:

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