Problem
(Spending Multiplier) If the MPC is 0.8, the MPM is 0.1, and the proportional income tax rate is 0.2, what is the value of the spending multiplier? Determine whether each of the following would increase the value of the spending multiplier, decrease it, or leave it unchanged:
a. An increase in the MPM
b. An increase in the MPC
c. An increase in the proportional tax rate
d. An increase in autonomous net taxes
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.