Question

1.Use a chart to show how 10 rounds of expenditure will increase real GDP. In particular, show the increase in the current round, and the cumulative increase from previous rounds.

please explain clearly as it's 15 marks

and please try to do ASAP

Answer 1

Assume MPC = 0.8 and investment raised by 100 crores. It will directly raise the level of income by 100 crore as one person spending is another person income.

Round	Change in Investment	Increase in GDP	Cumulative Increase in GDP
1	100	100.00	100.00
2	-	80.00	180.00
3	-	64.00	244.00
4	-	51.20	295.20
5	-	40.96	336.16
6	-	32.77	368.93
7	-	26.21	395.14
8	-	20.97	416.11
9	-	16.78	432.89
10	-	13.42	446.31

500.00 446.31 432.89 450.00 416.11 395.14 400.00 368.93 336.16 350.00 295.20 300.00 244.00 Increase in GDP 250.00 180.00 200.00 150.00 100.00 80.00 100.00 64.00 51.20 40.96 32.77 26.21 50.00 20.97 16.78 13.42 0.00 100 1 2 3 4 6 7 8 9 10 U Round Increase in GDP Cumulative Increase in GDP