Skiddy
 
Reply Tue 14 Oct, 2014 07:55 pm
In a closed economy households pay 20 cents tax for every dollar in their gross income and 3/4 of their income in every Yd (Disposable Income). What's the multiplier?
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EconLaoShi
 
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Reply Sun 1 Mar, 2015 07:14 am
@Skiddy,
This question is poorly worded, and there is not enough information to determine the multiplier. In order to figure out what the multiplier is, if any, you need the initial change in spending then the Marginal Propensity to Consume, or the Marginal Propensity to Save (to which you'll work to figure out the MPC) OR you can get it from the initial change and the subsequent change in rGDP.
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