1
Q
Multiplier =
A
Change in real GDP / Change in Aggregate expenditure
1/(1-MPC)
2
Q
MPC =
A
Change in consumption / Change in income
3
Q
MPS =
A
1 - MPC
Change in saving / change in income
4
Q
Give the multiplier formula, stating what the different parts represent=
A
1/(1-[b(1-t) - M)]), where
b = MPC
t = marginal tax
M = Marginal propensity to import
5
Q
Name 3 ways that the multiplier can be increased:
A
1) increasing MPC
2) Decreasing marginal tax
3) Decreasing marginal propensity to import
6
Q
Autonomous tax multiplier =
A
-MPC/1-Slope of AE
7
Q
Give the 2 ways to get the slope of AE
A
1) MPC
2) b(1-t) - M
