Any permanent decrease in autonomous real spending will cause even larger decreases in real GDP per...
Any permanent decrease in autonomous real spending will cause even larger decreases in real GDP per year.
A. False
B. True
If the MPC = 0.8, a permanent increase in planned real investment of $40 billion will increase real GDP by a total of
A. $200 billion
B. $40 billion.
C. $80 billion.
D. $160 billion.
Homework Answers
1. Ans: True
Explanation:
when autonomous expenditure decreases, real GDP will decrease by a larger amount due to multiplier effect. Thus, the statement is true.
2. Ans: $200 billion
Explanation:
Multiplier = 1 / (1 - MPC) = 1 / (1 - 0.8) = 5
Increase in total real GDP = 5 * $40 billion = $200 billion
Add Answer to:
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