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Vesnalui [34]
3 years ago
14

Consider two nations, Spendia and Savia. The MPC for Spendia is 0.8, and the MPC for Savia is 0.5. Assume that both nations expe

rience an increase in gross investment (I) of $100 million at their existing GDP levels. Instructions: In part a, enter your answers for changes in income as a whole number and multiplier answers to 2 decimal places. In part b, round your answers to 2 decimal places. a. Considering the multiplier effect, what will be the overall increase in income (Y) for each nation
Business
1 answer:
ruslelena [56]3 years ago
6 0

Answer: See explanation

Explanation:

The increase in income for Spendia will be:

= 1 / (1 - MPC)

where MPC = 0.8

= 1 / (1 - 0.8)

= 1 / 0.2

= 5

Increase in income = Gross investment × multiplier

= $100 × 5

= $500 million

The increase in income for Savia will be:

= 1 / (1 - MPC)

where MPC = 0.5

= 1 / (1 - 0.5)

= 1 / 0.5

= 2

Increase in income = Gross investment × multiplier

= $100 × 2

= $200 million

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Explanation:

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Hawk Corporation purchased 10,000 shares of Diamond Corporation common stock in 2016 for $50 per share. Hawk Corporation does no
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Answer:

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