What is the size of the multiplier

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Reference no: EM131076547

Suppose that an initial $10 billion increase in investment spending expands GDP by $10 billion in the first round of the multiplier process. Also assume that GDP and consumption both rise by $9 billion in the second round of the process.

Instructions: Round your answers to 1 decimal place.

a. What is the MPC in this economy? $________

b. What is the size of the multiplier? _______

c. If, instead, GDP and consumption both rose by $9.5 billion in the second round, what would have been the size of the multiplier? _____

Reference no: EM131076547

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