If the marginal propensity to consume (MPC) is 0.75, and if the goal is to increase...
If the marginal propensity to consume (MPC) is 0.75, and if the goal is to increase real GDP by $400 million, then by how much would government spending have to change to generate this increase in real GDP?
Group of answer choices
a. $200 million.
b. $400 million.
c. $140 million.
d. $100 million.
Homework Answers
Ans) K = 1/(1-MPC) = 1/(1-0.75) = 4
We know, K = 
= $400 million / 4 = $100 million.
Option d.
[ K is multiplier, Y is income and I is investment]
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