Help pleaseeee (1 Viewer)

[fairladyz]

hey, i was doing the 2002 economics hsc paper,
and i'm totally stuck on a question
Q23 part b
how do you calculate the simple multiplier with the information from the table?!?
like how do you even calculate the mps???

Year Income Consumption Savings Investment
1 400 360 40 200
2 500 420 80 200
3 600 480 120 200

thanks guys!

 

[ComingUpForAir]

do u want marginal propensity to save (MPS) or marginal propensity to comsume (MPC)?
MPS= (80-40)/100=0.4
MPC=1-0.4=0.6

 

[chicktracts]

Just to clarify (if you need some clarifications):

MPS = Change in S / Change in I
MPC = Change in C / Change in I

Looking at the Income column:
The change in Income is 100 each year.
(600-500, 500-400)

Looking at the Consumption column:
The change in Consumption is 60 each year.
(480-420, 420-360)

Looking at the Savings column:
The change in Savings is 40 each year.
(120 - 80, 80-40)

So,

MPS = 40 / 100 = 0.4
MPC = 60 / 100 = 0.6

Note: MPS + MPC = 1
(So you can just calculate one and then subtract it from 1 to find the other.)

Therefore, there are two equations for the simple multiplier:

k = 1 / MPS
OR
k = 1 / (1-MPC) [This is the one stated in the syllabus.]

So, using the first equation:

k = 1 / 0.4 = 2.5

 

[fairladyz]

ohh, i get it now!! thanks heaps guyss