# Ecological Discussion About Marginal Propensity

*label*Business

*timer*Asked: Jan 2nd, 2014

**Question description**

Can anyone help me wit these problems?

1. Calculate
the multiplier for each of the following:

-The expenditure multiplier if the marginal propensity to consume is 80%?

-The tax multiplier if the marginal propensity to save is 20%?

-The net (balanced budget) multiplier if government spending is financed by an increase in taxes?

2. If the level of autonomous expenditures is $4200 and the marginal propensity to consume (expend) is .8, what is the level of equilibrium income?

If the marginal propensity to consume rises to .9, what is the new level of equilibrium income?

3. If the economy has a recessionary gap of $400, and the marginal propensity to consume is .8, how much additional government spending would be required to eliminate the gap?

If instead of additional spending, calculate how big a tax cut would be required to eliminate the $400 gap.