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:
RESERVES $ 500 $ 3,500 DEPOSITS
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 ?
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 ...
Calculation of the tax multiplier given the government spending multiplier