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Ilia_Sergeevich [38]
3 years ago
7

As an elected official, you have been informed that real GDP is below its potential and that action should be taken to encourage

economic growth and bring the economy to its long-run equilibrium. The marginal propensity to consume is 0.6, and the amount of new government spending is $700 billion.
What is the multiplier?
Business
1 answer:
telo118 [61]3 years ago
8 0

Answer:

The answer is 2.5

Explanation:

Mpc = marginal propensity to consume

Mps = marginal propensity to save

Multiplier = 1/ 1-mpc= 1/ mps

Multiplier = 1/ 1-0.6 = 1/ 0.4 = 2.5

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