Assume that MPC is the one you calculated in Question 5.

Transfer payments increase by 40,000.00 units. As a result, the real GDP will change by [Fill in the blank],
units.

Question

Assume that MPC is the one you calculated in Question 5.

Transfer payments increase by 40,000.00 units. As a result, the real GDP will change by [Fill in the blank],
 units.

BlackTom AI · Accepted Answer

The question asks how much real GDP changes when transfer payments rise by 40,000 units, given the MPC from Question 5.

First, we recall the relevant multiplier logic for transfers. An increase in transfer payments directly raises household income by the amount of the transfer times the marginal propensity to consume (MPC). That initial increase in consumption then induces further rounds of spending, which are captured by the standard fiscal multiplier applied to autonomous spending. For lump-sum transfers, the overall GDP change is:

ΔY = MPC × ΔTR × [1 / (1 − MPC)]

This simplifies to ΔY = [MPC / (1 − MPC)] × ΔTR.

Using ΔTR = 40,000, we see that the magnitude of ΔY depends on MPC. If, for example, MPC from Question 5 were 0.75, then:

ΔY = [0.75 / (1 − 0.75)] × 40,000 = [0.75 / 0.25] × 40,000 = 3 × 40,000 = 120,000.

Thus, given the provided answer of 120,000.00, this result is consistent with an MPC of 0.75, since 0.75 ÷ (1 − 0.75) equals 3, and 3 × 40,000 equals 120,000.

If MPC were different, the multiplier would change accordingly. The key idea is that the change in GDP from a transfer is amplified by the MPC through the spending multiplier, specifically via the ratio MPC/(1 − MPC).

In summary, the real GDP change is determined by the formula ΔY = (MPC / (1 − MPC)) × ΔTR, and a resulting ΔY of 120,000 implies an MPC of 0.75 in this scenario.

ECN 001B C01-C06 WQ 2025 Homework 8 - The Fed Funds and the Goods Markets

Assume that MPC is the one you calculated in Question 5. Transfer payments increase by 40,000.00 units. As a result, the real GDP will change by [Fill in the blank], units.

查看解析

登录即可查看完整答案

类似问题

In theory, an initial injection of spending of $1 million by a government can result in an increase in real Gross Domestic Product (GDP) greater than $1 million due to

An initial increase in government spending of $100 billion can create more than $100 billion of spending throughout the economy by what economists call the __________ effect.

35. Refer to the figure. If the aggregate demand curve shifts from AD2 to AD1, the multiplier effect on real GDP will be a decrease from A. Q3 to Q1. B. Q2 to Q4. C. Q2 to Q1. D. Q3 to Q4.

55. If households in the economy save more of any extra income that they earn, then the multiplier effect will A. increase. B. decrease. C. be unaffected. D. become less than 1.0.

An increase in the MPC

Suppose the marginal propensity to consume is 0.75. If businesses become more optimistic about the future and raise their investment by $10, the short-run equilibrium output will _____ and consumption will _.

As contrasted to the mainstream view, Keynesian economists believe that ________ than mainstream economists believe.

更多留学生实用工具

考试浏览器助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单