Can someone explain Schweser Reading 19 question 21 regarding the fiscal multiplier?
Govt reduces spending by $50M, T = 30%, MPC = 80%.
the fiscal multiplier is = 1/[1-MPC(1-T)] = 1/[1-.8(1-.3)]
I’m getting 7.14 as the multiplier, schweser calcs 2.27
Am I missing something???作者: lrttlrtt 时间: 2013-8-10 18:10
Your formula is right, re-check your calculation [1-.8(1-.3)]=0.44, 1/0.44=2.27....
