Question by : MPS MPC Questions ECONOMICS MULTIPLIER?
-equilibrium level of output
-value of the multiplier
-what will the equiliberium output be if the government reduced spending by 50?
-what will happen to inventories if aggregate expenditure is 2000? 2500?
The MPC = 0.85
The MPS = 0.15
Equiliberium value of output = I think it is 666.66 ????????? am I right?
If the government reduced spending by 50, would the equilibrium output be 333.33 ?????
If AE is 2000 or 2500 what would happen to inventories????????
Any help would be appreciated.
Answer by Anjaree
If the government reduced spending by 50, the new equilibrium is 500/.3=1,666.67.
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