Effects of MPC and MPS to GDP

Related BrainMass Solutions

• MPC and MPS

  450815 MPC and MPS Explain the relationship between the marginal propensity to consume and the marginal propensity to save. How do these two components affect GDP?

• National income equilibrium

  In fact, if the MPC and MPS are calculated based on after-tax disposable income, they equal one: MPC + MPS = 1. Because MPC = .5, in this example MPC= MPS.

• effect of changing the savings rate on consumption

  Calculate and describe the effect of changing the savings rate on the multiplier. ? Describe the likely changes to consumption and equilibrium GDP due to a decline in the savings rate.

• Calculate the multiplier

  not clear..Is C = Consumption and y = GDP?? Please clarify and send iot thro' BM and I will answer your last question.. Thanks.. Calculate the multiplier for the following cases.

• Effect of tax rate changes

  A reduction in taxes would be also expressed as a negative number, which would yield a positive increase in GDP. For every 1% change in taxes, GDP changes by -MPC/MPS. Thus a 10% reduction in taxes yields a change in GDP of 10 x MPC/MPS.

• marginal propensity to consume

  If MPC increases, MPS decreases and vice versa because both of these add to 100% or MPC+MPS= 100% and thus, decline in one increases another and vice versa.

• MPC and Marginal Propensity to Import (MPm)

  If it's a close economy, MPS=1-MPC=0.4, so B is true If the GDP increases by 200, then the spending on imports increases by 200*MPm = 200*0.2 = 40 , so D is also true Therefore, we choose (E) MPC and Marginal Propensity to Import (MPm) help is

• Marginal Propensity to consume and to save

  What is the value of the MPC (marginal propensity to consume)? MPC = CHANGE IN CONSUMPTION/ CHANGE IN INCOME = 75/100=.75 2. What is the value of MPS (marginal propensity to save)? MPS=1-MPC=.25 3.

• Level of Equilibrium of GDP

  0.25 C= a+bY a=100 b=MPC (Change in Consumption/Change in Y) C= 100+.75Y MPS=1-MPC S=Y-C = Y-(100+.75Y) S= .25Y-100 Keynesian Multiplier=1/MPS BUSHGARDEN ECONOMY 1 What is the level of equilibrium GDP?