By how much the gdp is supposed to rise

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Reference no: EM13222099

Suppose MPI = 0.2 and MPC = 0.6
If AD goes up by 40, since the multiplier is 5, GDP will rise by 200. But WHAT in GDP will rise? It will rise by 40 (because MPI=0.2) and C will rise by 120 (because MPC=0.6). But 40 + 120 only reaches 160 and GDP is supposed to rise by 200. So something else needs to rise by 40. What is it? One book claimed it is Sp. Is this correct?

Reference no: EM13222099

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By how much the gdp is supposed to rise : If AD goes up by 40, since the multiplier is 5, GDP will rise by 200. But WHAT in GDP will rise. I see that I will rise by 40 (because MPI=0.2) and C will rise by 120 (because MPC=0.6). But 40 + 120 only reaches 160 and GDP is supposed to rise by ..

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