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Phantasy [73]
2 years ago
15

g Assume that a hypothetical economy with an MPC of 0.8 is experiencing severe recession. Instructions: In part a, round your an

swers to 2 decimal places. Enter your answers as positive numbers. In part b, enter your answers as whole numbers. a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $25 billion
Business
1 answer:
Klio2033 [76]2 years ago
7 0

Answer: $5 billion

Explanation:

First find the spending multiplier which is a multiplier that shows how Aggregate demand increases as a result of additional spending.

Multiplier = 1 / (1 - Marginal propensity to consume)

= 1 / ( 1 - 0.8)

= 5

If the government wants to raise Aggregate demand by $25 billion, they should spend:

Increase in AD = Amount * Multiplier

25 billion = Amount * 5

Amount = 25 / 5

= $5 billion

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3 years ago
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Exhibit 5-2 price and quantity demanded data price quantity demanded 5 20 4 25 3 30 2 35 1 40 using exhibit 5-2, what is the pri
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Answer:

The price elasticity of demand is -5

Explanation:

Elasticity of demand measure the responsiveness of demand against the change in price of the product. It shows how much demand changes if there is the change in price.

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3 years ago
Read 2 more answers
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