1) Assume that Canadian government taxes away $0.15 of each dollar of new income, that 35% of the remaining $0.85 of disposable income is spent on imports, and that 2% of disposable income is saved. Enter your responses below rounded to 2 decimal places. a. The marginal propensity to withdraw is . b. From each new dollar of income $ is spent on domestic consumption items. c. The value of the Canadian spending multiplier is .
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1) Assume that Canadian government taxes away $0.15 of each dollar of new income, that 35% of the remaining $0.85 of disposable income is spent on imports, and that 2% of disposable income is saved. Enter your responses below rounded to 2 decimal places. a. The marginal propensity to withdraw is . b. From each new dollar of income $ is spent on domestic consumption items.
2) In each case below a particular fiscal policy affects an economy's AD curve via the spending multiplier. Calculate the spending multiplier and find the direction and size of the shift in the AD curve. Enter your responses for the spending multiplier rounded to 2 decimal places, and size of the shift of the AD curve rounded to 1 decimal place. Do not put minus signs in your answers.
3) A decrease in government purchases of $8 billion leads to an initial $4 billion decrease in withdrawals.
4) n each of the following cases, calculate the values of MPC, MPW, and the spending multiplier. Enter your responses below rounded to 2 decimal places. c. A $9 million decrease in income causes a $6.75 million drop in withdrawals. MPC is therefore , MPW is and the spending multiplier is |
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