An economy has a fixed price level, no imports, and no income taxes. MPC is 0.9, and real GDP is $200 billion. Businesses increase investment by $10 billion. Calculate the new level of real GDP and explain why real GDP increases by more than $10 billion. The new level of real GDP is $100 billion. Real GDP increases by more than $10 billion because the increase in investment OA. enables firms to produce more output OB. increases exports OC. induces an increase in consumption expenditure OD. increases the marginal propensity to consume

An economy has a fixed price level, no imports, and no income taxes. MPC is 0.9, and real GDP is $200 billion. Businesses increase investment by $10 billion. Calculate the new level of real GDP and explain why real GDP increases by more than $10 billion. The new level of real GDP is $100 billion. Real GDP increases by more than $10 billion because the increase in investment OA. enables firms to produce more output OB. increases exports OC. induces an increase in consumption expenditure OD. increases the marginal propensity to consume

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 4TY

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