The multiplier size is 1 / 0.2, which equals 5, and the MPC in this economy is $32 / $40, which equals 0.8. In the second round, $32 billion, the multiplier is five, and the MPC is 0.8.
<h3><u>What is the GDP?</u></h3>
Gross domestic product, also known as GDP, is a gauge of the size and health of a nation's economy over time (usually one quarter or one year). The size of various economies at various times is also compared using this method.
<u>Calculation:</u>
A. Change in consumption / Change in income equals marginal propensity to consume.
Marginal Consumption Propensity = 24/40
0.6 is the marginal propensity to consume.
B. The factor is 1 divided by (1 - MPC)
The factor equals 1 / 1 - 0.6.
The factor is 2.5.
C. Instead, if after the $40 billion increase GDP and consumption rise by $32 billion, the MPC is equal to $32 / $40 = 0.8.
The Multiplier = 1 / 1 - 0.8 = 5
Learn more about GDP with the help of the given link:
brainly.com/question/26261960
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