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  • Econ U2 P1s 2010 - 2013 - WITH ANSWERS

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    Shania Mohammed
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    This document shows that the multiplier (k) is equal to 1 divided by 1 minus the marginal propensity to consume (mpc) or marginal propensity to import (mps). It provides two examples where the mpc or mps is given, and calculates the resulting multiplier of 2.5 in both cases. It also notes that depreciation occurs under a floating exchange rate system while devaluation occurs under a fixed exchange rate system.

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    Econ_U2_P1s_2010_-_2013_-_WITH_ANSWERS

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    This document shows that the multiplier (k) is equal to 1 divided by 1 minus the marginal propensity to consume (mpc) or marginal propensity to import (mps). It provides two examples where the mpc or mps is given, and calculates the resulting multiplier of 2.5 in both cases. It also notes that depreciation occurs under a floating exchange rate system while devaluation occurs under a fixed exchange rate system.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    5 views60 pages

    Econ U2 P1s 2010 - 2013 - WITH ANSWERS

    Uploaded by

    Shania Mohammed
    This document shows that the multiplier (k) is equal to 1 divided by 1 minus the marginal propensity to consume (mpc) or marginal propensity to import (mps). It provides two examples where the mpc or mps is given, and calculates the resulting multiplier of 2.5 in both cases. It also notes that depreciation occurs under a floating exchange rate system while devaluation occurs under a fixed exchange rate system.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 60

    k = 1 / mps k = 1 / 1 - mpc

    = 1/0.4 = 1 / 1 - 0.6
    = 2.5 = 2.5
    or floating

    fixed system
    depreciation - floating
    devaluation - fixed

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