Go to the BEA website www.bea.gov. On the left tab under Publications, go to the Interactive Data Tables. Select National Income and Product Accounts. From Table 1.1.6 and 1.1.7 examine all four components of GDP (C, I, G, and Xn).
Which of these four components of AD declined the most during the 2007 and 2009 recession?
Do you think an increase in government\'s spending (G) can boost the Aggregate Demand (AD) in a recession?
Analyze why the economy may operate below full-employment GDP in the short run. How can the multiplier have a negative effect?
What is the relationship between the multiplier and the marginal propensities? Explain.
Solution
multiplier is directly related to the marginal propensities. the multiplier is related to the marginal propensity because it equals 1/MP S. the multiplier and the MPS are inversely related. The multiplier is also related to the marginal propensity to consume because it also equals 1/ (1–MPC).
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Go to the BEA website www-bea-gov- On the left tab under Publications-.docx
1. Go to the BEA website www.bea.gov. On the left tab under Publications, go to the Interactive
Data Tables. Select National Income and Product Accounts. From Table 1.1.6 and 1.1.7 examine
all four components of GDP (C, I, G, and Xn).
Which of these four components of AD declined the most during the 2007 and 2009 recession?
Do you think an increase in government's spending (G) can boost the Aggregate Demand (AD)
in a recession?
Analyze why the economy may operate below full-employment GDP in the short run. How can
the multiplier have a negative effect?
What is the relationship between the multiplier and the marginal propensities? Explain.
Solution
multiplier is directly related to the marginal propensities. the multiplier is related to the marginal
propensity because it equals 1/MP S. the multiplier and the MPS are inversely related. The
multiplier is also related to the marginal propensity to consume because it also equals 1/
(1–MPC).
