Question 78 (1 point) Calculate the impact of a $96 billion increase in government spending on...

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Answer 1

Answer #1

Answer :

Formula for multiplier = k = 1/(1 - c + ct + m)

Where c = Marginal propensity to consume = 0.8

t = Marginal tax rate = 15% = 0.15

m = Marginal propensity to import = 0.15

Therefore : k = 1/(1-0.8+0.8*0.15+0.15) =2.12765957

Change in G = $96 billion increased

Change in Y = k * Change in G = 2.12765957 * ($96 billion) = $204.26 billion increase in equilibrium GDP

Answer : Option 2) $204.26 billion

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Answer 2

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