00:02
In both scenarios here, the government is attempting to stimulate the economy during a recession.
00:08
So we can have a look at how the concept of the mpc and the multiplier effect would impact these efforts.
00:15
So in scenario 1, we've got the stimulus checks.
00:25
So here the government's sending stimulus checks of $600 to each person.
00:30
So the action directly increases people's disposable income.
00:34
And so the mpc, which represents the proportion of additional income people will spend, plays a really crucial role here.
00:42
So if our mpc is high, then people will spend a significant proportion of the stimulus checks, which will lead to an increased consumption.
00:50
And so the multiplier effect comes into play because it increases because as we have increased consumption, this boosts demands.
00:57
And in turn, this encourages businesses to produce more and hire more work, which leads to a chain reaction of increased spending and economic activity...