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Simple spending multiplier

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Reference no: EM13334715

How would i go about doing this problem? I understand how to find the multiplier but i guess the wording of this is throwing me off?

(Simple Spending Multiplier) Suppose that the MPC is 0.8, while investment, government purchases, and net exports sum to $500 billion. Suppose also that the government budget is in balance.

a. What is the sum of saving and net taxes when desired spending equals real GDP? Explain.

b. What is the value of the multiplier?

c. Explain why the multiplier is related to the slope of the consumption function.

Reference no: EM13334715

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