Macroeconomics + Economy 2009 Update 18th Edition by Campbell McConnell, Sean Masaki Flynn,Stanley Brue

Exercise 3

What is the multiplier effect What relationship does the MPC bear to the size of the multiplier The MPS What will the multiplier be when the MPS is 0,.4,.6, and 1 What will it be when the MPC is 1,.9,.67,.5, and 0 How much of a change in GDP will result if firms increase their level of investment by $8 billion and the MPC is.80 If the MPC is.67