Question

Suppose that an initial $20 billion increase in investment spending expands GDP by $20 billion in the first round of the multiplier process. If GDP and consumption both rise by $10billion in the second round of the process, what is the MPC in this economy?

Instructions: Round your answer to one decimal place

MPC = $

What is the size of the multiplier?

Instructions: Round your answer to one decimal place

The multiplier = $

If, instead, GDP and consumption both rose by $12 billion in the second round, what would have been the size of the multiplier?

Instructions: Round your answer to one decimal place

The multiplier = $

Answer 1

The answer and procedures of the exercise are attached in the following archives.

Explanation

You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.