Author Question: Multiplier Effect of Government PurchasesIf an increase in government spending of $400 billion ... (Read 749 times)

gboileau · **on:** Nov 23, 2022

Question 1

Multiplier Effects

Suppose that investment spending decreases by $50 million. If the marginal propensity to consume (MPC) is 0.55, then what is the change in real GDP? (Round to the nearest hundredth when appropriate.)
◦ -$0.01 million
◦ -$27.5 million
◦ -$111.11 million
◦ -$90.91 million

Question 2

Multiplier Effect of Government Purchases

If an increase in government spending of $400 billion results in a $2.0 trillion increase in equilibrium real GDP, then the government purchases multiplier is ________. (Round to the nearest hundredth when appropriate.)
◦ 400
◦ 800
◦ 200
◦ 0.5

kyledifference · **Reply #1 on:** Nov 23, 2022

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