k multiplier (1 Viewer)

[corzacollymore]

I have no idea of how to calculate questions regarding k multipler such as the the equibilruim level of income

can someone help me?

 

[OzKo]

Could you post a sample question?

 

[barbernator]

the investment multiplier is actually one of the best places they could bring in quality mathematics into the syllabus, but instead they make it dead boring.

 

[OzKo]

the investment multiplier is actually one of the best places they could bring in quality mathematics into the syllabus, but instead they make it dead boring.

Macroeconomics isn't really that maths intensive.

 

[barbernator]

Macroeconomics isn't really that maths intensive.

i just mean the fact that it is a limiting sum. Like everyone knows the multiplier is 1/MPS but don't know why

 

[OzKo]

i just mean the fact that it is a limiting sum. Like everyone knows the multiplier is 1/MPS but don't know why

It deviates from the purpose of the course.

In university, they don't bother deriving the multiplier either.

 

[corzacollymore]

Year C Y
1 110 150
2 200 300

The table shows national accounts data for Consumption and National income in $billion for an economy
What is the new equilbrium level of income in year 3 if investment increases by 40 billion

 

[powersupply]

The multiplier or 'k' is = 1/1-MPC or 1/MPS.
MPC = change in consumption/change in income. So in this case change in consumption is 200 - 110 = 90, and change in income is 300 - 150 = 150. Therefore MPC = 90/150 i.e. 0.6
So the multiplier is 1/1-0.6 or 1/0.4 which = 2.5.
Therefore 2.5 x the 40b increase in investment = 100b increase in income.

 

[fahout]

The multiplier or 'k' is = 1/1-MPC or 1/MPS.
MPC = change in consumption/change in income. So in this case change in consumption is 200 - 110 = 90, and change in income is 300 - 150 = 150. Therefore MPC = 90/150 i.e. 0.6
So the multiplier is 1/1-0.6 or 1/0.4 which = 2.5.
Therefore 2.5 x the 40b increase in investment = 100b increase in income.

shaat i get it now ! thanks