catinalanderson catinalanderson

18-03-2021
Advanced Placement (AP)

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If Investment expenditures increase by $300B and MPC is equal to 0.90, what will be the increase in real GDP?

If Investment expenditures increase by 300B and MPC is equal to 090 what will be the increase in real GDP class=

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topeadeniran2 topeadeniran2

24-03-2021

Answer: 3000B

Explanation:

Firstly, we calculate the spending multiplier which will be:

= 1 / (1 -MPC).

= 1 / ( 1 - 0.9)

= 1 / 0.1

= 10

The increase in the real GDP will then be gotten by multiplying the multiplier by the increase on investment. This will be:

= 10 × 300

= 3000B

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