Assuming a fixed amount of taxes and a closed economy, calculate ...

[sam.t96]

Assuming a fixed amount of taxes and a closed economy, calculate the value of the government purchases multiplier, the tax multiplier, and the balanced budget multiplier if the marginal propensity to consume equals 0.75.
 
  What will be an ideal response?

Question 2

Calculate the value of the government purchases multiplier if the marginal propensity to consume equals 0.9, the tax rate equals 0.25, and the marginal propensity to import equals 0.15.
 
  What will be an ideal response?

[amy.lauersdorf90]

Answer to Question 1

Government purchases multiplier = 1 / (1 - 0.75 ) = 4
Tax multiplier = -0.75 / (1 - 0.75 ) = 3
Balanced budget multiplier = 1

Answer to Question 2

Government purchases multiplier = 1 / 1 - (0.9(1 - 0.25 ) - 0.15 ) = 2.11

[sam.t96]

Thank you

[amy.lauersdorf90]

Happy to help you