Economics questions

ghgrand · #1 12-14-2006, 09:41 PM

Quick question. I could not find the answer in my econ book or on google so hopefully you guys can help me out here. How much does a dollar put into the economy eventually generate? If you have a link for the answer that would be good too. Thanks

Andrew

stinkypete · #2 12-14-2006, 09:47 PM

500 times .002 cents

Thremp · #3 12-14-2006, 10:15 PM

[ QUOTE ]
Quick question. I could not find the answer in my econ book or on google so hopefully you guys can help me out here. How much does a dollar put into the economy eventually generate? If you have a link for the answer that would be good too. Thanks

Andrew

[/ QUOTE ]

Depends on bank reserve requirement essentially.

gull · #4 12-14-2006, 10:19 PM

Is this a question about the money multiplier?

I think the simple answer is that it depends on the bank reserve ratios.

icetonez · #5 12-14-2006, 11:46 PM

$1 to $.02?

RedJoker · #6 12-15-2006, 01:53 PM

I assume you're talking about the Keynesian Multiplier. In that case one dollar becomes 1 times the Keynesian Multiplier in dollars.

The Keynesian Multiplier is dependent on the Marginal Propensity to Consume (MPC) and the Income Tax Rate (t). More complex models take into account other variables such as imports.

The formula for the Keynesian Multiplier is:

1/[1-b(1-t)]

where b is the MPC and t is income tax rate.