Suppose the MPC is .9 and planned investment increases by $100 billion. After the multiplier process has taken effect, the Aggregate Demand curve will have shifted to the right by $_______________ billion.
Answer
Change in AD =change in investment * multiplier
multiplier =1/(1-MPC)
=1/(1-0.9)
=10
Change in AD =100*10
=$1000 billion
the GDP shifts right by $1000 billion
Suppose the MPC is .9 and planned investment increases by $100 billion. After the multiplier process...
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