Question

Explain the difference between the Expenditure/Spending Multiplier and the Money Multiplier. Include the equation used to determine the multiplier for each.

Answer #1

Expenditure multiplier is the government fiscal policy tool which indicates that the real GDP in the economy can be increased by multiple times the increase in the autonomous spending that can be in the form of increase in government spending, investment spending, exports etc. money multiplier on the other side is a monetary policy tool used to to calculate the change in money supply when there is a change in the monetary base

Spending multiplier is given by 1/1-mpc where MPC is the marginal propensity to consume. Money multiplier is given by (1+c)/(r +c). Here, c is the currency deposit ratio and r is the reserve ratio.

What is the difference between the consumption multiplier and
the money multiplier in terms of how each influences aggregate
demand?

Explain the basic idea of the expenditure multiplier ? and
explain how, could the consumers change the magnitude of the
multiplier.
Explain why the expenditure multiplier is greater than 1.
?

Explain what the spending multiplier is.

1.Which of the following is a true statement about the
multiplier? *
The multiplier effect does not occur when autonomous
expenditures decrease
The multiplier is a value between zero and one
The smaller the MPC, the larger the multiplier
The multiplier rises as the MPC rises
2.According to the Keynesian model of the macroeconomic, the
most effective means for closing a recessionary gap is *
Decrease in marginal tax rates which shift SRAS
Increases in government spending which shift AD...

Calculate the expenditure multiplier and explain the process by
which it works.

(a) what is meant by the term ' multiplier effect ' as used in
macroeconomics?
(b) what determines the size of the spending (expenditure)
multiplier?
(c) why is the multiplier effect of an increase in welfare
payments less than the multiplier effect of an increase in
government spending of an equal amount?

Explain what is meant by the spending
multiplier and explain what variable(s) determine
its size?

Please explain the difference between the transaction
demand for money and the asset demand for money, and how they work
together to determine the total demand for money.

what is the relationship between investement (business spending)
and multiplier?

28-
If autonomous spending rises,
the expenditure equilibrium will rise by the increase in
autonomous spending.
the expenditure equilibrium will increase by the level of GDP
times the expenditure multiplier.
the expenditure equilibrium will fall by the increase in
autonomous spending.
the expenditure equilibrium will rise by the increase in
autonomous spending multiplied by the expenditure multiplier.
31-
An example of fiscal policy is
an increase in autonomous spending by consumers.
an increase in social security spending by the elderly....

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 6 minutes ago

asked 25 minutes ago

asked 32 minutes ago

asked 33 minutes ago

asked 41 minutes ago

asked 42 minutes ago

asked 54 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago