Fiscal Multipliers

1. If the MPC is 30% what is the MPS?

2. Using the answer above is this a good thing in Keynesian Economic Theory? Why or Why not?

3. If MPS is 20% what is MPC?

4. Using the answer above what is the multiplier?

5. What is the multiplier effect if the government increases (investment) spending by $20 million?

6. Would this be enough if the GDP Gap were $150 million?

7. What would happen if the MPS was 40%?

MPC would be?

The multiplier would be?

The multiplier effect with a $20 million increase would be?

8. If the MPC is .60 and the government's goal is to increase real GDP by $ 500 Million, then government spending must increase by how much?

A. $100 Million

B. $540 Million

C. $600 Million

D. $200 Million

Answers

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