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Norma-Jean [14]
3 years ago
13

Compared to a country with an MPS of 0.05, a country with an MPS of 0.2 would have to change government expenditures by ________

_ as much to have the same impact on real GDP.
Business
1 answer:
const2013 [10]3 years ago
8 0

Answer: Four times.

Explanation:

Based on the information given, the government expenditure multiplier in this case goes thus:

K = ∆Y/∆G = 1/1-MPC = 1/MPS

For the first country with a MPS of 0.05, K = 1/MPS = 1/0.05 = 20

For the first country with a MPS of 0.2, K = 1/MPS = 1/0.2 = 5

Therefore, 20/5 = 4.

Therefore, the answer is four times.

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