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Economists Think That the Marginal Propensity to Consume for the U.S.economy

question 244

Essay

Economists think that the marginal propensity to consume for the U.S.economy is somewhere around 0.9.Based on our simple multiplier formula,this would imply that the multiplier for the United States should be around 10.However,economists agree that the spending multiplier is closer to 2.What might explain this supposed anomaly?


Definitions:

Normative Social Influence

The influence of other people that leads us to conform in order to be liked and accepted by them, resulting in social harmony and cohesion.

Informational Influence

The effect on an individual's behavior or attitudes caused by the desire to be correct and to understand the proper way to act in a given situation.

Informational Influence

A form of social influence wherein individuals change their opinions or behaviors in response to receiving new information or observing others.

Normative Influence

The process of using others to determine how to fit in.

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