Fiscal Multipliers Answers
*Do the work first before checking answers*
1) 1-.30= MPS is .70 or 70%
2) In Keynesian Economics you want consumption to be bigger than saving. Remember Keynes wants people to spend money, not save it, in an attempt to move the aggregate demand curve.
3) 1-.20= MPC is .80 or 80%
4) 1/ (1-.80)= The Multiplier is 5
5) 5* $20 Million is $100 Million
6) No, we would be short by $50 Million
7) 1-.40= MPC is .60 or 60%; Multiplier is 1/(1-.60)= 2.5; and the multiplier effect would be $50 Million
8. Answer is D. Multiplier is 1/(1-.60)= 2.5 * $200 Million equals $500 Million