Unformatted text preview: schedules are the levels of income and output. Once the schedules are set, the determinants of where the schedules are located would be the amount of household wealth, expectations of future income, the real interest rate, prices and product availability; the relative size of consumer debt, and the amount of taxation. 2. What is the multiplier effect? What relationship does the MPC bear to the size of the multiplier? The MPS? a. The multiplier effect is the magnified increase in equilibrium GDP that occurs when any component of aggregate expenditures changes. The greater MPC, and smaller the MPS, the greater the multiplier. Page 1 ECON 2020—Macroeconomics Page 2...
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- Spring '11