Question help...multiplier effect

anon2332

Hello,

Could someone please go through this question for me to make sure everythings right.

Given that:

Consumption

C= 400+0.7Y

Savings

S= -400+0.2Y

Taxation

T= 0.1Y

Imports

Z= 200+0.1Y

Investment

I= 1200

Government Spending

G= 500

Exports

X=1300

Calculate the multiplier (k). Using k, calculate the new equilibrium level of output, when exports increase by 400 from X= 1300 to X= 1700. Confirm the new equilibrium level of output using the withdrawls - injections approach.

AD = C+I+G+X-Z

400+0.7Y+1200+500+1700-(200+0.1Y)

Equalibrium when W=J, where W= S+T+Z and J= I+G+X

W=-400+0.2Y+0.1Y+200+0.1Y= -200+0.4Y
J=1200+500+1300= 3000

Equilibrium when: -200+0.4Y=3000
Y1=8000 where Y1= Inital Equilibrium

K= 1/MPW = 1/(MPS+MPT+MPZ)
= 1(0.2+0.1+0.1) = 1/0.4 = 2.5
K= ΔY/ΔJ= ΔY/ΔX
i.e ΔY=K x ΔX

ΔY = 2.5 x 400 = 1000

New equilibrium = Y1 + ΔY = 8000 + 1000 = 9,000

So, Y* increases by 8000 from 1000 to 9000?

Thanks

Reply 1

MeAndBubbles

12

increased Y of 8000 when X increase 400, that would be a multiplier of 20?

Reply 2

Chrrye

17

Which multiplier are we talking about?

Fairly sure I could check this for you but just cant get my head around it laid out like this. Its been too long since I did these type of questions...

So I cant check method but the maths looks sound.

MeAndBubbles

increased Y of 8000 when X increase 400, that would be a multiplier of 20?

No.

Reply 3

MeAndBubbles

12

anon2332

Hello,

Could someone please go through this question for me to make sure everythings right.

Given that:

Consumption

C= 400+0.7Y

Savings

S= -400+0.2Y

Taxation

T= 0.1Y

Imports

Z= 200+0.1Y

Investment

I= 1200

Government Spending

G= 500

Exports

X=1300

Calculate the multiplier (k). Using k, calculate the new equilibrium level of output, when exports increase by 400 from X= 1300 to X= 1700. Confirm the new equilibrium level of output using the withdrawls - injections approach.

AD = C+I+G+X-Z

400+0.7Y+1200+500+1700-(200+0.1Y)

Equalibrium when W=J, where W= S+T+Z and J= I+G+X

W=-400+0.2Y+0.1Y+200+0.1Y= -200+0.4Y
J=1200+500+1300= 3000

Equilibrium when: -200+0.4Y=3000
Y1=8000 where Y1= Inital Equilibrium

K= 1/MPW = 1/(MPS+MPT+MPZ)
= 1(0.2+0.1+0.1) = 1/0.4 = 2.5
K= ΔY/ΔJ= ΔY/ΔX
i.e ΔY=K x ΔX

ΔY = 2.5 x 400 = 1000

New equilibrium = Y1 + ΔY = 8000 + 1000 = 9,000

So, Y* increases by 8000 from 1000 to 9000?

Thanks

K= 1/MPW = 1/(MPS+MPT+MPZ)

Dude, where did you get that equation from? Feel that's the weak spot. If you need further help let me know.

Reply 4

MeAndBubbles

12

Chrrye

Which multiplier are we talking about?

Fairly sure I could check this for you but just cant get my head around it laid out like this. Its been too long since I did these type of questions...

So I cant check method but the maths looks sound.

No.

Well then you must admit the maths is dodgy as is your tutoring abilities.

Reply 5

Chrrye

17

MeAndBubbles

Well then you must admit the maths is dodgy as is your tutoring abilities.

Not sure exactly what your trying to say,im not trying to tutor anyone.
Before you criticise consider the following:

anon2332

K= 1/MPW = 1/(MPS+MPT+MPZ)
= 1(0.2+0.1+0.1) = 1/0.4 = 2.5
K= ΔY/ΔJ= ΔY/ΔX
i.e ΔY=K x ΔX

ΔY = 2.5 x 400 = 1000

New equilibrium = Y1 + ΔY = 8000 + 1000 = 9,000

So, Y* increases by 8000 from 1000 to 9000?

Responding to that with this:

MeAndBubbles

increased Y of 8000 when X increase 400, that would be a multiplier of 20?

Rather than seeing that :

ΔY = 2.5 x 400 = 1000
New equilibrium = Y1 + ΔY = 8000 + 1000 = 9,000
Y1 = 8000
ΔY = 1000
So, Y* increases by 1000 from 8000 to 9000?

Which is what the person was trying to say, is a strong sign of an idiot.
They already worked 'K = 'the multiplier' ' out to be 0.25, how could it suddenly be 20?!

What I was saying was that without knowing which multiplier (tax government spending etc) was being sort I could not check the theory.

Reply 6

MeAndBubbles

12

Chrrye

Not sure exactly what your trying to say,im not trying to tutor anyone.
Before you criticise consider the following:

Responding to that with this:

Rather than seeing that :

ΔY = 2.5 x 400 = 1000
New equilibrium = Y1 + ΔY = 8000 + 1000 = 9,000
Y1 = 8000
ΔY = 1000
So, Y* increases by 1000 from 8000 to 9000?

Which is what the person was trying to say, is a strong sign of an idiot.
They already worked 'K = 'the multiplier' ' out to be 0.25, how could it suddenly be 20?!

What I was saying was that without knowing which multiplier (tax government spending etc) was being sort I could not check the theory.

Ugh! Now you're saying he has made maths mistake. Changing tunes to fit the crime, dumb fellow.

Reply 7

Chrrye

17

MeAndBubbles

Ugh! Now you're saying he has made maths mistake. Changing tunes to fit the crime, dumb fellow.

He probably just typed it up wrong tbh. Shame you couldnt see through that, but whatever.

Yeah, maybe but Iv got a tune for you then, dumbass. Crime: idiocy.

What exactly have you added to this thread? Nothing.
Except this gem which, tbh, is still pretty funny:
"increased Y of 8000 when X increase 400, that would be a multiplier of 20?"
Was that first post of your meant as a joke? That would make you just not funny instead of stupid.

Reply 8

dreadnaut

13

anon2332

K= 1/MPW = 1/(MPS+MPT+MPZ)

k = \frac{1}{1-MPW}

?

sorry if thats not right (probs isnt) but ive only dealt with the keynesian multiplier with consumptions while G,X and M are taken as exogenous and I is a function of the interest rate which itself is a function of income and round and round we go

Question help...multiplier effect

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