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    Problem No. 1 - Multiplier Computation

    Compute the expenditure multiplier and tax multiplier if the MPC is

    1. 0.80
    2. 0.60
    3. 0.90

    Problem No. 2 - Changes to National Income (Y)

    Suppose that there is a policy goal to increase national income $100 billion. Using the multipliers computed in Problem No. 1, determine the dollar amount of changes in Government spending (G) and changes in Taxes (T) to meet this objective.

    Compute the required ΔG and ΔT for each value of the MPC as given above.

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    Solution Summary

    This solution computes the expenditure multiplier and tax multiplier in this inquiry.