Economists Think That the Marginal Propensity to Consume for the Canadian

question 260

Essay

Economists think that the marginal propensity to consume for the Canadian economy is somewhere around 0.9.Based on our simple multiplier formula, this would imply that the multiplier for Canada should be around 10.However, economists agree that the government spending multiplier is less than 2.What might explain this supposed anomaly?

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Definitions:

Current Liabilities

Financial obligations a company is expected to settle within one year or within its operating cycle, whichever is longer.

Current Ratio

A financial metric that measures a company's ability to pay off its short-term liabilities with short-term assets.

Total Asset Turnover

A financial ratio that measures a company's efficiency in using its assets to generate sales revenue, calculated by dividing sales revenue by total assets.

Noncurrent Assets

Assets not expected to be converted into cash within one year or the operating cycle, including property, plant, and equipment.