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multiplier

When national income equals $40 000 million and government spending equals $15 000 million, an economy is in equilibrium below full employment. Out of every increase of $100 in national income, $15 is taken in taxes, $30 is spent on imports and $5 is saved. To raise national income to the full employment level of $50 000 million, to which level will the government need to raise its own spending?
A $15 500 million B $20 000 million C $25 000 million
D $35 000 million

Reply 1

nileiyen

can you help me please

Reply 2

username4583724

*deleted post*

(edited 4 years ago)

Reply 3

nileiyen

Original post by Mathsislove

B.
Change in national income = investment * (1-MPW)
MPW =0.5 so for every 100 invested, only 50 affects GDP. So to change GDP by £10 mill, you need to invest 20mill as only 50% of it will affect GDP.

thank you dear
may god bless you

Reply 4

nileiyen

In a closed economy with no government, consumption is three-quarters of income at all levels of income. The present equilibrium level of income is $220 million.
The full employment level of income is $240 million.
By how much would investment have to increase to reach full employment?
A $5 million
B $15 million
C $20 million
D $30 million
can you help me this please

Reply 5

username4583724

*deleted post*

(edited 4 years ago)

Reply 6

RogerOxon

Original post by Mathsislove

On the study help forums, the intention is to "help", not give answers. Please provide hints and corrections, not full solutions, which is against the forum rules.

Reply 7

nileiyen

Original post by Mathsislove

20 million because the only other thing is consumption.

sorry dear
the answer is 5 million

multiplier

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