Thank you for visiting If the equilibrium GDP is 18 trillion and the MPC is 0 8 what will be the required amount of autonomous spending to raise the. This page is designed to guide you through key points and clear explanations related to the topic at hand. We aim to make your learning experience smooth, insightful, and informative. Dive in and discover the answers you're looking for!
Answer :
Final answer:
To raise the level of income to 19 trillion, the required amount of autonomous spending is 1 trillion.
Explanation:
To calculate the required amount of autonomous spending to raise the level of income to 19 trillion, we can use the concept of the multiplier. The multiplier is calculated as 1 / (1 - MPC). In this case, the MPC is given as 0.8, so the multiplier is 1 / (1 - 0.8) = 1 / 0.2 = 5. To increase the GDP from 18 trillion to 19 trillion, we need an increase in autonomous spending equal to the difference divided by the multiplier, which is (19 trillion - 18 trillion) / 5 = 1 trillion. Therefore, the required amount of autonomous spending to raise the level of income to 19 trillion is 1 trillion.
Learn more about Multiplier effect here:
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