Final answer:
Using the spending multiplier of 2.13, the $800 million rise in government spending in Spartech results in a $1.704 billion increase in overall output or GDP.
Step-by-step explanation:
When analyzing economic impact, a key concept is the spending multiplier, which measures the effect of a change in spending on the overall economy. In the case of Spartech, if government spending rises by $800 million, the aim is to determine the change in overall output, also referred to as Gross Domestic Product (GDP). Given the spending multiplier in this economy is 2.13, for an additional expenditure of $100, GDP would increase by $213. Applying this to the $800 million increase in spending, the equation becomes $800 million × 2.13, which equals a $1.704 billion increase in GDP.
Looking at the marginal propensity to spend provides insight into how each dollar of income is used within the economy. If GDP changes by $100, it leads to an increase in consumption by $57, indicating a marginal propensity to spend of about 57 percent. According to the example provided, after successive rounds of spending, taxation, saving, and imports, the initial government expenditure continues to circulate and boost the economy.
Please provide me a big final answer: Using the spending multiplier of 2.13, an $800 million increase in government spending would lead to an overall output change of approximately $1.704 billion in Spartan's economy.