Purchase Solution

government spending multiplier

Not what you're looking for?

Ask Custom Question

Please see the attached file.

1. If the government spending multiplier is 6, what is the tax multiplier?

2. You are given this account for a bank:

ASSETS LIABILITIES

RESERVES $ 500 $ 3,500 DEPOSITS
LOANS 3,000

The required reserve ratio is 10 percent.

A. How much is the bank required to hold as reserves, given its deposits of $ 3,500?

B. How much are its excess reserves ?

C. How much can the bank increase its loans ?

Attachments
Purchase this Solution
Solution Summary

Calculation of the tax multiplier given the government spending multiplier

Solution Preview

1. The government spending multiplier is 1/MPS and the tax multiplier is -MPC/MPS = -(1-MPS)/MPS.). Its absolute value is always one less than the simple multiplier and ...

Purchase this Solution
Free BrainMass Quizzes
Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

View More Free Quizzes
Related BrainMass Solutions

  • Olympic games in London in 2012

    Thus, there is a government spending multiplier that is similar to the autonomous spending multiplier .

  • Marginal Propensity to consume and to save

    A decrease in government spending (G) or investment spending by businesses (I) lowers equilibrium GDP (Y) by the amount of the decrease times the multiplier. 6.

  • Calculation of the Multiplier Effect

    When the government begins a spending program, it increases government spending. This stimulates increased consumer spending. The total effect is given by the Spending Multiplier (SM).

  • MPS, MPC and Spending Multiplier: How to calculate

    Spending Multiplier = 1/MPS = 1/0.125 = 8 3a. Change in total spending = Change in government spending x Multiplier = $150 million x 8 = $1.2 billion 3b.

  • slope of the consumption function

    17160 (Simple Spending Multiplier) Suppose that the MPC is 0.8, while the sum of planned investment, government purchases, and net exports is $500 billion. Suppose also that government budget is in balance.

  • Value of the multiplier & sum of saving

    GDP equals aggregate expenditures of consumption, gross investment, government spending, and net exports Sum of saving and net taxes when desired spending equals real GDP= Planned Investment +Government Purchases +Net exports=$500 billion What is

  • Calculating the Equilibrium Output Level

    Use the government spending multiplier.

  • Expenditure and Tax Multipliers

    Calculating the different effects on the GDP of changing government spending versus changing taxes.

  • The multiplier

    If the Multiplier is 5, what is the impact on GDP in this illustration if government spending (G) increase by $10 billion? 1.)

View More Related Solutions