Question

Please answer All The Keynesian spending multiplier effect means that a given change in autonomous expenditures...

The Keynesian spending multiplier effect means that a given change in autonomous expenditures

A.    will change equilibrium income by an amount greater than the initial change in autonomous expenditures.

B.       will change equilibrium by an amount less than the initial change in autonomous expenditures.

C.    will change equilibrium income by an amount equal to the initial change in autonomous expenditures.

D.    will change the MPC by a multiple of the initial change in autonomous expenditures.

E.     will change the MPS by a multiple of the initial change in autonomous expenditures.

The Keynesian tax multiplier effect means that a given change in autonomous taxes

A.      will change equilibrium income by an amount greater than the initial change in autonomous taxes.

B.     will change equilibrium by an amount less than the initial change in autonomous taxes.

C.    will change equilibrium income by an amount equal to the initial change in autonomous taxes.

D.    will change the MPC by a multiple of the initial change in autonomous taxes.

E.     will change the MPS by a multiple of the initial change in autonomous taxes.

Given a marginal propensity to consume equal to 0.75, the Keynesian spending multiplier is equal to

A. 1.00

B. 2.00

C. 1.03

D. 4.00

E. 5.00

option 1
will change equilibrium income by an amount greater than the initial change in autonomous expenditures.

the Keynesian spending multiplier =1/(1-MPC)
so the given change in autonomous expenditure is multiplied by the multiplier for total maximum change in the economy because of the initial change in spending.

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option 1
will change equilibrium income by an amount greater than the initial change in autonomous taxes.
This also has the greater change in the income by the time of tax multiplier
tax multiplier=-MPC/(1-MPC)
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option D
Keynesian spending multiplier is equal to=1/(1-MPC)=1/(1-0.75)=4

?

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