Question

Question 1 20 pts Assume there is concern that the economy is heading into a recession, and a stimulus package of $170 billion is passed by the federal government. Teh administration predicts that this measure will provide an $850 billion boost to GDP this year becasue consumers will spend their extra cash on plasma televisions and other items. For this amount of stimulus, what is the extablished value of MPCused in this forecast? HTMLEditor B uA- L E 3 x E E ST 1T12pt EEE -Paragraph O Words

Answer 1

MPC = Change in Consumption / Change in output

Stimulus by government in economy = $170 billion

As consumers will spend more on plasma televisions and other items of total $850 billion.

Thus MPC = 850 / 170 = 5