Calculate the total change in aggregate spending if investment increases by $200 billion and the marginal...
Calculate the total change in aggregate spending if investment increases by $200 billion and the marginal propensity to consume is 0.8.
Homework Answers
Answer
Multiplier =1/(1-MPC)
=1/(1-0.8)
=5
total change in aggregate spending =change in investment *multiplier
=200*5
=$1000
the total change in aggregate spending is $1000 billion
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