Question

Explain the difference between the Expenditure/Spending Multiplier and the Money Multiplier. Include the equation used to...

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

Homework Answers

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.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What is the difference between the consumption multiplier and the money multiplier in terms of how...
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...
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.
Explain what the spending multiplier is.
1.Which of the following is a true statement about the multiplier? * The multiplier effect does...
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.
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)...
(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?
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,...
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?
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....
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
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT