When there is a shift in autonomous expenditure, why is there a multiple expansion of income and real GDP? Discuss. In your answer, trace and show clearly the calculations of the multiplier effect through the first five rounds of spending when there is an increase in autonomous expenditure of $42 billion with the marginal propensity to consume of 0.65. Then, calculate the final change to income and the real GDP under the complete cycle of the spending chain.

When there is a shift in autonomous expenditure, why is there a multiple expansion of income and real GDP? Discuss. In your answer, trace and show clearly the calculations of the multiplier effect through the first five rounds of spending when there is an increase in autonomous expenditure of $42 billion with the marginal propensity to consume of 0.65. Then, calculate the final change to income and the real GDP under the complete cycle of the spending chain.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter9: The Keynesian Model In Action

Section: Chapter Questions

Problem 7SQP

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