An increase in the MPC
1 answer:
Answer:
The correct answer is option a.
Explanation:
MPC or marginal propensity to consume measures the change in consumption due to change in the income level of the consumer. It is the ratio of the percentage change in consumption to the percentage change in income.
The multiplier shows the extent to which the aggregate demand will change due to a change in government spending.
The multiplier is expressed as,
An increase in the MPC thus increases the value of the multiplier. The greater the multiplier the greater will be the change in the aggregate demand due to a change in government spending.
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Answer:
The correct answer for 1st option is $158,206.95 and for 2nd option is $157,733.11.
Explanation:
According to the scenario, the given data are as follows:
1st option
Payment ( PMT ) = $85,000
Interest rate (I) = 7%
Time (N) = 2 years
So, the effective rate of interest can be calculated as :
R =
R = 7.2290%
Present value can be calculated by using following formula:
P = PMT x (((1-(1 + r) ^- n)) / i)
Hence, present value of 1st option can be calculated as:
PV = 85000×((1-(1 + 7.229%) ^- 2) / 7%)
PV = $158,206.95
Now, present value of 2nd option can be calculated as:
Payment = $74,000
Bonus = $20,000
So, PV = 74000×((1-(1 + 7.229%) ^- 2) / 7%)
PV = 137,733.11
Bonus (add) = $20,000
Total PV = $157,733.11
Hence, the present value for 1st option is $158,206.95 and for 2nd option is $157,733.11.