Assignment This assignment addresses marginal propensity to consume, the multipl

Assignment
This assignment addresses marginal propensity to consume, the multiplier effect, and how these affect the overall economy.
1. Explain how each dollar spent by consumers throughout the economy ultimately comes back to people in the form of the following:
a. Rent as it relates to natural resources.
(Enter response here.)
b. Interest as it relates to loanable funds.
(Enter response here.)
c. Dividends as it relates to business investment.
(Enter response here.)
d. Wages and salaries.
(Enter response here.)
2. Define marginal propensity to consume (MPC) and the multiplier (M).
(Enter response here.)
3. Each term (3 months), the current group of economics students completed a questionnaire about how much they would spend on new purchases compared to how much they would save/pay off bills if they suddenly and unexpectedly received a check for $1,000. The average MPC is shown in the table below.
Month in which student poll was taken Average of students’ responses as MPC
March 0.41
June 0.30
September 0.22
December 0.56
a. What do these MPCs imply about the students’ thinking over the course of the year?
(Enter response here.)
b. What is likely happening in the economy during the same period of time?
(Enter response here.)
4. Using the appropriate formulas and an MPC of 0.85, calculate the multipliers for each of the two scenarios. Next, calculate the overall impact each will have on the increase in money circulating through the economy.
a. To stimulate an economy in a serious recession, the government spends a total of $700 million to send each person a stimulus check worth $600.
(Enter response here.)
b. To stimulate an economy in a serious recession, the government spends a total of $700 million to construct nationwide high-speed internet infrastructure so that all areas of the country, especially rural areas, will have high speed internet service.
(Enter response here.)
c. Explain why one of these scenarios has a greater overall impact on this economy.
(Enter response here.)
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References:
Author. (Date.) Title. Source.
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