Question

Suppose that the marginal propensity to consume is lower in Japan than in the United States....

Suppose that the marginal propensity to consume is lower in Japan than in the United States. In which country would the multiplier for government purchases (that is, the amount that Y changes in response to a given change in G) be larger? Be sure to explain your answer both graphically and in terms of the underlying economics.

Homework Answers

Answer #1

The government purchases multiplier is given by : ?Y/?G = KG

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