The estimation of the marginal propensity to consume should be 2 ÷3
The computation of the estimation of the marginal propensity to consume is shown below:
But before that the multiplier should be
= Total demand for goods & services ÷ government spending
= $42 billion ÷ $14 billion
= 3
Now as we know that
Multiplier = 1 ÷ (1 - MPC)
3 = 1 ÷ (1 - MPC)
1 - MPC = 1 ÷ 3
MPC = 1 - 1 ÷3
= 2 ÷ 3
Therefore we can conclude that The estimation of the marginal propensity to consume should be 2 ÷3
Learn more about the multiplier here: brainly.com/question/490794
Answer:
a. Due to increases in hay prices, an input for raising cattle, the price of a gallon of 2% milk increases from $2.98 to $3.25. QUANTITY DEMANDED DECREASES, as the price of a good or service increases, the quantity demanded decreases.
b. Groupon has a Groupon for $6 off the price of laser tag. QUANTITY DEMANDED INCREASES, as the price of a good or service decreases, the quantity demanded increases.
c. Sharp increase in the price of wood causes increases in prices for dressers and desks. QUANTITY DEMANDED DECREASES, if the price of a key input increases, the production costs will increase, resulting in a higher selling price ⇒ lower quantity demanded.
d. Week long special at the grocery store, where pork shoulder is on sale at $1.99 a pound, down from $3.99 a pound. QUANTITY DEMANDED INCREASES, as the price of a good or service decreases, the quantity demanded increases.
e. Buy one get one free special for MP3 albums on Amazon. QUANTITY DEMANDED INCREASES, the buy one get one free promotion lowers the price of a good or service, resulting in higher quantity demanded.
Answer:
C. Reducing the reserve requirement on banks
Explanation:
The Federal Reserve( Fed) expects commercial banks to maintain a percentage of customer deposits in their custody. The amount that the banks keep is known as reserves. The Fed sets the percentage of deposits to be held as reserves. The Fed may adjust this percentage in line with its monetary objectives.
By reducing the reserve requirements percentage, commercial banks remain with a bigger portion of deposits that they lend out. It means banks will issues out more loans to customers. An increase in lending adds more money to the economy. Reducing the reserve requirement increases the money supply in the country.
