If the MPC = 0.8, a permanent increase in planned real investment of $40 billion will...
If the MPC = 0.8, a permanent increase in planned real investment of $40 billion will increase real GDP by a total of
Homework Answers
Since the given information is;
If the MPC = 0.8,
MPS=1-MPC
=1-0.8
=0.2
a permanent increase in planned real investment of $40 billion.
Multiplier= 1/ MPS
=1/0.2
=5
Hence a permanent increase in planned real investment of $40 billion will increase real GDP by a total of= Multiplier* change in the investment
=5*40 billions
=$200 billions
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