Question

tyler boettcher
he spending multiplier
ginal propensity to save is 0.1. how will a decrease in taxes of $50 billion and a
government spending of $50 billion affect aggregate demand?
propensity to consume is 0.75, then a $100 increase in investment will resu
increase in equilibrium real gross domestic product of
w shows the level of household savings at various levels of disposable in
gs\tdisposable income
\t$10,000
\t$12,000
ps?
ending multiplier?
equilibrium
according to the graph above and starting wi
equilibrium point r, which of the following sh
the short-run and long run impact of a cost-

Explanation:

Step1: Recall Spending Multiplier Formula

The spending multiplier \( k \) is given by \( k=\frac{1}{1 - MPC} \), where \( MPC \) is the marginal propensity to consume. Here, \( MPC = 0.75 \).

Step2: Calculate the Multiplier

Substitute \( MPC = 0.75 \) into the formula: \( k=\frac{1}{1 - 0.75}=\frac{1}{0.25} = 4 \).

Step3: Find the Change in GDP

The change in investment \( \Delta I=\$100 \) billion. The change in equilibrium real GDP \( \Delta Y=k\times\Delta I \). Substitute \( k = 4 \) and \( \Delta I=\$100 \) billion: \( \Delta Y=4\times100=\$400 \) billion.

Answer:

The increase in equilibrium real gross domestic product is \(\$400\) billion.