Calculate the Value of the Government Purchases Multiplier If the Marginal

question 236

Essay

Calculate the value of the government purchases multiplier if the marginal propensity to consume equals 0.9,the tax rate equals 0.25,and the marginal propensity to import equals 0.15.

---

Definitions:

Marginal Cost

The rise in total expenses incurred from the production of an extra unit of a product or service.

Profit-maximizing Output

The level of production at which a firm achieves the highest possible profit, where marginal revenue equals marginal cost.

Higher Prices

An increase in the cost that consumers must pay to purchase goods or services.

Income Redistribution

The transfer of income from certain individuals or groups to others through mechanisms like taxes, welfare programs, and subsidies, aimed at reducing economic inequality.