Why value of multiplier is low
In poor countries people spend a big percentage of their income so that APC and MPC are high. Yet, the value of multiplier is low. Explain why?
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Working of the multiplier method is based on one basic supposition: that there exists, surplus capacity in the economy therefore that whenever consumption expenses rises (implying raise in demand) there is an equivalent increase in production (implying rise in income). However poor countries lack in production capacity.
Accordingly, if demand increases (in terms of rise in consumption expenses), there is increasing pressure of demand on existing output (that is, implying inflation or rise in prices) instead of increase in output or income.
Tariffs: -are also called import quotas. -may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs). -are per unit subsidies designed to promote exports. -are excise taxes on goods exported abroad.
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In this figure shown below, the price elasticity of demand for DVD games among prices of $30 and $40 is nearest to: (i) 7/6. (ii) 1/2. (iii) 3/7. (iv) 7/3. (v) 1/3. Discover Q & A Leading Solution Library Avail More Than 1444109 Solved problems, classrooms assignments, textbook's solutions, for quick Downloads No hassle, Instant Access Start Discovering 18,76,764 1952197 Asked 3,689 Active Tutors 1444109 Questions Answered Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!! Submit Assignment
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