A Discussion on the Multiplier Process
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The economy starts at equilibrium and the MPC = 0.75. What would be the effect of a $300 increase in government spending once all the rounds of the multiplier process are complete?
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Solution Summary
This solution presents a very brief formula and explanation in order to calculate the effect of an increase in taxes when all rounds of the multiplier process is complete. All calculations are provided.
Solution Preview
The multiplier is given by
Multiplier = 1/MPS
and we ...
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