Thank you for visiting Suppose GDP is 12 trillion and the government enacts new spending of 2 trillion Assuming all else is constant and the MPC is 10 what. 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 :
The new level of GDP will be C) $14.2 trillion after factoring in the government’s new spending and the spending multiplier.
To determine the new level of GDP after the government enacts new spending of $2 trillion, with an initial GDP of $12 trillion and a marginal propensity to consume (MPC) of 10%, follow these steps:
- Find the spending multiplier. The formula for the spending multiplier is 1 / (1 - MPC). In this case, MPC is 0.10, so the multiplier is 1 / (1 - 0.10) = 1.11.
- Calculate the total effect on GDP by multiplying the new government spending by the spending multiplier: $2 trillion * 1.11 = $2.22 trillion.
- Add the total effect to the initial GDP: $12 trillion + $2.22 trillion = $14.22 trillion.
Therefore, the new level of GDP will be $14.2 trillion. This illustrates how government spending can significantly impact GDP through the multiplier effect. The correct option is C.
Thank you for reading the article Suppose GDP is 12 trillion and the government enacts new spending of 2 trillion Assuming all else is constant and the MPC is 10 what. We hope the information provided is useful and helps you understand this topic better. Feel free to explore more helpful content on our website!
- You are operating a recreational vessel less than 39 4 feet long on federally controlled waters Which of the following is a legal sound device
- Which step should a food worker complete to prevent cross contact when preparing and serving an allergen free meal A Clean and sanitize all surfaces
- For one month Siera calculated her hometown s average high temperature in degrees Fahrenheit She wants to convert that temperature from degrees Fahrenheit to degrees
Rewritten by : Jeany
