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If the marginal propensity to consume (mpc) is 0.75, a $50 decrease in government spending, other things being equal, would cause equilibrium real gdp to:
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If the marginal propensity to consume (mpc) is 0.75, a $50 decrease in government spending, other things being equal, would cause equilibrium real gdp to:

User Viswesvar Sekar
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1 Answer

1 vote

Answer: We use the multiplier formula here,


image

Now, as multiplier is equal to


image

Therefore, equilibrium GDP falls by $200.

User Nabheet
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