
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Transcribed Image Text:Businesses in the nation of Islandia have been accumulating cash because they have a pessimistic outlook of the national economy.
Due to recent changes in the economic outlook of Islandia, business leaders have started investing some of their accumulated cash.
Instructions: Enter your answers as a whole number. Use a positive number to show an increase and a negative number to show a
decrease.
a. If business leaders invest a total of $10 billion of accumulated cash, what is the maximum expected change in GDP if Islandia's
marginal propensity to consume is 0.75?
$ 160 billion
b. Suppose that the recent economic outlook in the country of Mountainia has been the opposite. Businesses are instead
accumulating cash and postponing planned investments. If business leaders postpone $5 billion of planned investment spending.
what is the maximum expected change in GDP if Mountainia's marginal propensity to save is 0.1?
$
160 billion
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