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Natasha2012 [34]
2 years ago
6

An economy that is currently in equilibrium and at full employment has an increase in Disposable income of $50 billion. If the m

arginal propensity to consume is 80%, what will be the increase in real GDP
Business
1 answer:
Sonbull [250]2 years ago
5 0

Answer:

$250 billion.

Explanation:

The computation in the increase in real GDP is shown below:

Given that

MPC = 80% or 0.80

Income multiplier = 1 ÷ (1 - MPC )

= 1 ÷ (1 -0.80 )

= 1 ÷ 0.20

= 5

Now

The Increase in disposable income is $50 billion

So,

The Increase in real GDP is

= 50 × 5

= $250 billion

We simply applied the above formula so that the correct value could come

And, the same is to be considered

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