Question
You are given the following data for national economy of
a country Y: Equilibrium GDP is $6000 million. MPC is 0.8 It is considered to be necessary to increase GDP by 5%. Find what amount of additional government spending (without changing taxes) would be needed to reach the desired increase of GDP?Solution
A 5% increase in GDP which is currently $6,000,000,000 would be $300,000,000. A 5% increase in GDP would require less than a 5% increase in spending due to the multiplier effect. Every dollar of government spending will be spent and re-spent in the circular flow of economic activity. For example, if road construction is authorized, government spending for materials and workers will be spent again by the materials suppliers and the hired workers. Thus, the boost to the economy will be more than 5%. If the MPC (Marginal Propensity to Consume) is .8, then the MPS (Marginal Propensity to Save) must be .2, because together the percentages must add up to 1. Thus, the spending multiplier is 1 / (1 - MPC). In this example, it would be 1 / .2 or 5. That means that each dollar of government spending will generate 5 times that much GDP. To increase GDP by $300,000,000, therefore would take an increase of $300,000,000/5 or $60 million.
Five friends Alex, Ben, Chris, David, and Emma are sitting around a circular table facing the center. Alex sits to the immediate right of Ben. Alex is n...
Four different positions of the same dice are given below. Find the number opposite of 23.
Eight colleagues K, L, M, N, O, P, Q and Rare seated in a circle facing the centre. N is an immediate neighbour of both L and Q. P is an immediate neigh...
Which number will replace the question mark (?) in the following series?
6, 20, 42, ?, 110, 156
Which of the following numbers will replace the question mark (?) in the given series?
91, 102, 139, ?, 187, 198, 235
What should come in place of the question mark (?) in the given series based on the English alphabetical order?
WSF, BUK ,GWP ,LYU, ?
Three of the following four are alike in a certain way and thus form a group. Which is the one that does NOT belong to that group?
(Note: The odd...
In a certain code language, 'MENIAL' is coded as 'NIEAML' and 'INCOME' is coded as 'CONMIE'. What is the code for 'FOREGO' in the given code language?
Select the number from among the given options that can replace the question mark (?) in the following series.
3, 20, 121, 604, 2417, ?Â
Which of the following figures best depicts the relationship among criminals, thieves and judges?