(Transcript of audio with descriptions. Transcript includes narrator headings and description headings of the visual content)
(Speaker)
In the next part, you're asked to find the numerical value of the multiplier. Recall the equation for the multiplier.
(Description)
The problem is presented. In an economy without government purchases, transfers, or taxes, and without imports or exports, aggregate autonomous consumer spending is 500 billion dollars, planned investment spending is 250 billion dollars, and the marginal propensity to consume is 0.5. Find the equilibrium value of Y asterisk algebraically.
(Speaker)
Recall the equation for multiplier.
(Description)
The equation for the multiplier is presented: Multiplier equals fraction 1 in the numerator and 1 minus MPC in the denominator.
(Speaker)
Assuming no government spending or imports/exports is one divided by one minus the MPC. Using the values from the problem, the MPC is 0.5, so the equation becomes one divides 1 minus 0.5. We can rewrite the equation as 1 divided by 0.5, which equals 2. So with an MPC of 0.5 the multiplier is 2.