Question Details

Marginal Propensity To Consume and Effect Of Multiplier
Congress is considering a tax credit program for those who purchase wind or solar-powered products. Proponents of the program have said that $400 million will be given directly to taxpayers and are arguing that this will have an economic effect that is greater than the original $400 million spent because of the multiplier effect. Many voters and taxpayers are not familiar with the concept of a multiplier in this sense. Your think tank has decided to produce a short report that will help voters better understand the proponents’ claims and Gabe has asked you to write this.
Be sure to include the following in your report:
Give a basic explanation of how the multiplier concept is computed, including MPC.
Assume that the average American- marginal propensity to consume (MPC) is ½, and American producers’ MPC is also ½.
Calculate the following, explaining how you arrived at each result: 
The amount consumers will spend on new consumption
The amount of new spending from producers
The multiplier in this case
The total increase in spending from the primary spending of $400 million 
Explain the multiplier concept as it applies in this case.
What are the qualifications and limitations of the Multiplier Model? 


NOT a single line should be cut copy paste.
Length of assignment is  500 to 700 words.
Times new Roman 12 fonts
Double spacing
References should be included


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