Consider a hypothetical economy. Households spend $0.90 of each additional dollar they earn and save the remaining $0.10. The multiplier for this economy is.

Suppose government purchases, G, in this economy decrease by $200 billion. The decrease in G will lead to a decrease in income, generating a decrease in consumption that decreases income yet again, and so on.

the answer is "b.the increased supply will create a surplus. "

the essential thought behind price controls is straightforward - utilize the power of law to modify the equilibrium of a market. for instance, the legislature may choose that the steel business needs to survive, and in this way pass a law to set a value floor on steel. this implies all steel sold must offer at or over the floor value, which must be set over the equilibrium cost for it to have any impact. the switch could likewise happen - the administration can choose that steel is excessively costly and set a value roof underneath its equilibrium value, with the goal that all steel must be sold at or beneath that ceiling.