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d1i1m1o1n [39]
3 years ago
14

If autonomous consumption increases by $50 billion and the MPC is 0.95, the resulting change in total spending equals___________

_______ billion, assuming that idle resources exist at each expenditure round and the multiplier is operative.
Business
1 answer:
pickupchik [31]3 years ago
6 0

Answer: $1,000 billion

Explanation:

The change in total spending is calculated by:

= Autonomous consumption increase * Multiplier

Multiplier:

= 1 / (1 - MPC)

= 1 / (1 - 0.95)

= 1 / 0.05

= 20

Change in total spending:

= 50 billion * 20

= $1,000 billion

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