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Discuss and Explain What Effect a Reduction in the Marginal

question 5

Essay

Discuss and explain what effect a reduction in the marginal propensity to consume has on the size of the multiplier.


Definitions:

Economic Value

The significance of a good or service for individuals or society in terms of its ability to satisfy needs or wants.

25-year Annuity

A financial product that provides a series of payments made at equal intervals over 25 years.

Compounded Semi-annually

A method of computing interest where the interest is calculated and added to the principal twice a year.

Periodic Interest Rate

The interest rate applied to a loan or investment over a specific period of time, less frequently than annually.

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