Marginal Propensities and Multipliers (Taxes and Saving)

Question 1

(MPS) Marginal Propensity to Save formula

Answer 1

change in Consumption/change in income

Question 2

(MPC) Marginal propensity to Consume Formula

Answer 2

change in saving/ change in income

Question 3

the multiplier effect

Answer 3

if there is an additional $1 expenditure of C,I,G or X, then aggregate demand will increase by more than $1

Question 4

the spending multiplier and formula

Answer 4

shows the change in ag demand if people were to save x amount of money
1/MPS

Question 5

the tax multiplier

Answer 5

-MPC/MPS ALWAYS NEGATIVE

Question 6

how do you find spendings effect on GDP?

Answer 6

change in spending x Spending multiplier