Welcome Back..Answers to chapter questions (given before break)

Multiple  Choice:
1. c
2. b
3. b
4. c
5. e

Free Response  (Answers provided for question1)

2. a. $50 million
Multiplier = 1/(1-mpc)= 1/(1-.75)= 4
Change in G x 4= $200 million
Change in G= $50 million

b. 10
$20 x multiplier = $200 million
multiplier = 200/20 = 10

c. .1
1/(1-mpc)= 1/mps=10
MPS=.1