Compared to a country with an MPS of 0.05, a country with an MPS of 0.2 would have to change government expenditures by as much to have

Compared to a country with an MPS of 0.05, a country with an MPS of 0.2 would have to change government expenditures by as much to have the same impact on real GDP.

Related Posts

This Post Has 3 Comments

  1. answer; /// the best answer to the above question is; the main economic goal that a society consider when deciding the best way to distribute its wealth is equity, this to ensure that all resources are equally distributed; ///(a) (economic equity)

  2. Four times.

    Explanation:

    Based on the information given, the government expenditure multiplier in this case goes thus:

    K = ∆Y/∆G = 1/1-MPC = 1/MPS

    For the first country with a MPS of 0.05, K = 1/MPS = 1/0.05 = 20

    For the first country with a MPS of 0.2, K = 1/MPS = 1/0.2 = 5

    Therefore, 20/5 = 4.

    Therefore, the answer is four times.

Leave a Reply

Your email address will not be published. Required fields are marked *