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2010 MC question (1 Viewer)

esraa

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question 12
The table shows selected data for a hypothetical economy.

Year C S I
1 100 50 400
2 200 150 400
3 300 250 400

What is the value of the multiplier? The answer is 2.0
I got 1 for some reason.
 

artosis

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What did you use to get 1?

Kinda odd question, not in the textbook :S
Taking a guess here:
But; change in consumption = change in savings from the table
So MPS = 0.5?
k = 1/MPS = 2
I just made up that on the spot by fiddling with the numbers
Hope its right :S
 

mangoz

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question 12
The table shows selected data for a hypothetical economy.

Year C S I
1 100 50 400
2 200 150 400
3 300 250 400

What is the value of the multiplier? The answer is 2.0
I got 1 for some reason.
Yeah basically what the above person said but I think you could have expressed it a bit better so you don't confuse the OP. He means the change in consumption and change in savings in this question are the same. OP if you meant that then awkward for me :/ HAHA okies :)
 
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esraa

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LOL cant remember i think i did:

Y= C + I
then i found the change in C divided by the change in Y to find MPC, then 1-MPC = MPS and then 1/MPS=k and i ended up with 1

but your way seems right if you got 2.. i never knew change in C= change in S :S
 
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Just to clarify for those who search this question up:

The key to this question is that △Y = △C + △S.

To illustrate how we get there:
We know that MPS = △S/△Y, and MPC = △C/△Y and that MPS + MPC = 1.

Combining these two things, that means that △C/△Y + △S/△Y = 1, and if we multiply both sides by △Y, we get:
△Y = △C + △S

Relating it to this question.
△Y = 100 + 100 = 200

From there we calculate MPC and multiplier
MPC = △C/△Y = 100/200 = 0.5

k = 1/(1-MPC) = 1/0.5 = 2
 

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