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BARSIC [14]
3 years ago
9

International trade, and changes in the aggregate price level.

Business
1 answer:
san4es73 [151]3 years ago
4 0

Answer:

A) 50 millions

B) 10

C) 0.10

Explanation:

Government spending multiplier:

1/(1-MPC) = 1/MPS

1/(1-0.75) = 1/0.25 = 4

The government multiplier is 4 thus, to increase the GDP by 200 million the government spending should be of 50 millions as:

government spending x multiplier = increasein GDP

G x 4 = 200

G = 200/4 = 50

we are given with G and increase in GDP we should solve for multiplier:

government spending x multiplier = increasein GDP

20 x m = 200

m = 200 / 20 = 10

C) the multiplier is: 1/(1-MPC) = 1/MPS

if m = 10 then:

1/MPS = 10

MPS = 1/10 = 0.10

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3 years ago
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