What is the spending multiplier

Reference no: EM133277916

Question - Ruth Langmore has recently been given an inheritance, and she decides to take this $250,000 of this money to invest in her new business venture wither her brother, Wyatt Langmore. The marginal propensity to consume is currently 0.65.

a) What is the spending multiplier? Carry out the calculation to four decimal places.

b) What is the change in equilibrium/aggregate income?

c) What would happen to equilibrium/aggregate income if Ruth and Wyatt decided to consume or spend the $250,000 instead of investing it?

d) According to the lectures, what variables will be affected by the spending multiplier?

Reference no: EM133277916

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