Assume the value of equilibrium real gdp

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Reference no: EM1320423

Q. Assume the value of equilibrium real GDP is $800 billion dollars. Assume the government increased spending by $20 billion dollars to increase real GDP.

a) If the MPC is 0.6 Illustrate what is the value of the multiplier?

b) Illustrate what is the new equilibrium value of real GDP corresponding to the $20 billion dollar increase in government spending?

c) If the MPC is 0.8 illustrate what is the value of the multiplier?

d) Illustrate what would be the new equilibrium value of real GDP corresponding to the $20 billion dollar increase in government spending?

Illustrate also explain your answers using the aggregate expenditure model. Ensure that you elucidate how any necessary calculations.

Reference no: EM1320423

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