By how much will gdp change if firms increase their investment by $13 billion and the mpc is 0.9?

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Business

Leia Larsen

9 July, 10:55

By how much will gdp change if firms increase their investment by $13 billion and the mpc is 0.9?

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Titus · Answer 1

Change in GDP by $130 billion if firms increase their investment by $13 billion and the mpc is 0.9. This is because GDP change is equal to the expenditure multiplier * investment increase, where the expenditure multiplier = 1 / (1-mpc) = 1 / (1-0.9) = 10. Therefore, GDP change = 10 * $13 billion = $130 billion.